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The Bank of Botswana has maintained the Monetary Policy Rate (MoPR) at 5.5%, as policymakers attempt to balance persistently high inflation against an economy that remains under significant pressure.
The decision, taken at the Monetary Policy Committee’s meeting on 27 August 2026, comes as headline inflation, despite easing from 10.7% in June to 9.4% in July, remains well above the Bank’s medium-term objective range of between 3 and 6%. The decline in inflation was largely driven by lower domestic fuel prices, which reduced headline inflation by an estimated 2.3 percentage points.
However, the Bank expects inflation to remain above its target range until the first quarter of 2027. Inflation is projected to average 7.9% in 2026 before easing to 4.9% in 2027. Higher fuel and electricity costs, potential food price pressures and geopolitical developments remain among the key risks facing the inflation outlook.
The decision to leave interest rates unchanged also reflects Botswana's subdued economic performance. Real GDP grew by just 0.2% in the 12 months to March 2026, following a 1.6% contraction during the corresponding period a year earlier. While the improvement was supported by a slower decline in mining and a recovery in some non-mining sectors, the Bank said the economy continues to face structural challenges, particularly in the diamond sector.
The weakness in the economy is also evident in the banking sector, where commercial bank credit contracted by 1.6% in the year to June 2026, compared with growth of 10.3% a year earlier. Household lending declined by 4.5%, while lending to businesses contracted by 2.7%, highlighting the impact of tighter financial conditions and subdued demand for credit.
Despite the difficult environment, the Ministry of Finance is projecting a recovery in economic growth, with GDP expected to expand by 3.1% in 2026 and 5.4% in 2027. The recovery is expected to be supported by improvements in mining, economic diversification initiatives and growth in sectors such as renewable energy, agriculture, manufacturing, digitalisation and tourism.
The Bank, however, warned that the outlook remains vulnerable to a prolonged downturn in the diamond market, geopolitical tensions, climate-related shocks and delays in implementing the Botswana Economic Transformation Programme.
The MPC unanimously agreed not only to maintain the MoPR at 5.5% but also to keep the Standing Deposit Facility rate at 4.5% and the Standing Credit Facility rate at 6.5%. It further maintained the moratorium on commercial banks' prime lending rates.
The latest decision underscores the difficult balancing act facing Botswana's central bank: supporting an economy desperate for stronger growth while ensuring that elevated inflation does not become entrenched.