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The Bank of Botswana’s Monetary Policy Committee (MPC) has raised the Monetary Policy Rate (MoPR) by 200 basis points to 5.5%, citing rising inflation risks and the need to strengthen policy transmission, while instructing commercial banks not to increase their prime lending rates.
The move comes against a backdrop of mounting global and domestic pressures, including geopolitical tensions, supply chain disruptions and higher commodity prices linked to the ongoing conflict in the Middle East. These factors have pushed up the cost of living and clouded Botswana’s economic outlook.
Inflation, which stood at 4.2% in March, is expected to rise sharply and breach the Bank’s 3–6% objective range in the second quarter of 2026. The central bank now projects average inflation of 8.7% for the year, driven by recent increases in fuel prices, public transport fares and medical aid premiums.
Despite these pressures, the MPC framed the rate hike as a “recalibration” rather than a tightening cycle, aimed at improving liquidity management and reinforcing earlier policy signals.
Economic growth remains fragile. Botswana’s GDP contracted by 0.7% in 2025, although this marked an improvement from a steeper 2.8% decline in 2024. A modest recovery to 3.1% growth is projected for 2026, supported by non-mining sectors and ongoing diversification efforts under the government’s economic transformation agenda.
However, downside risks persist, including livestock disease outbreaks, climate shocks and continued weakness in the global diamond market.
The MPC also raised the Standing Deposit Facility rate to 4.5% and the Standing Credit Facility rate to 6.5%. It reiterated concerns that some banks are widening lending margins above prime rates, undermining the intended impact of monetary policy.
Looking ahead, the Bank said it will continue to monitor inflation dynamics and financial conditions closely, signalling readiness to act further if price stability risks intensify.