BoB Holds Monetary Policy Steady Amidst Falling Inflation 

  • Notes downward adjustment in domestic fuel prices effected in June for decreased inflation
  • Warns inflation may rise higher than projected if int’l commodity prices increase beyond current forecasts
  • Notes growth-enhancing economic transformation reforms being implemented


At its recent meeting, the Monetary Policy Committee (MPC) of the Bank of Botswana (BoB) maintained the Monetary Policy Rate (MoPR) at 2.65 percent.

According to the MPC in a recent statement released by BoB, headline inflation decreased significantly from 4.6 percent in June to 1.5 percent in July 2023, breaching the lower bound of the bank’s medium-term objective range of 3 – 6 percent.

“The fall in inflation was mainly due to the dissipating impact of the earlier increase in domestic fuel prices in the corresponding period in 2022 (base effects),” says the statement.

Subdued domestic demand 

Furthermore, inflation fell on account of the downward adjustment in domestic fuel prices effected on June 21, 2023.”

Inflation is forecast at 1.2 percent for August 2023 and the MPC projects that inflation will remain below the lower bound of the objective range temporarily and revert to within the objective range from the first quarter of 2024 into the medium term.

“The projected low inflation is due to, among others, subdued domestic demand and the downward revision in recent forecasts of international food prices and trading partner countries’ inflation,” the statement notes. “The risks to this inflation profile/trajectory were assessed to be balanced.”

Global economic integration

However, the MPC observes that inflation could be higher than projected if international commodity prices increase beyond current forecasts, supply and logistical constraints persist and the reversal of global economic integration (geo-economic fragmentation) gains pace.

“Furthermore, any possible upward adjustment in administered prices that is not factored in the current projection may lead to higher inflation,” it states.

“However, inflation could be lower than anticipated because of the possibility of weaker domestic and global economic activity, possible disinflationary effects of higher monetary policy rates globally, stronger-than-anticipated appreciation of the Pula against the South African Rand, and restrained international commodity prices.”

Economic transformation reforms

The MPC recognises that in addition to the dissipating impact of increases in administered prices in 2022, the economy is expected to operate below full capacity in the short term and, therefore, not generate demand-driven inflationary pressures.

However, inflation is forecast to be within the objective range in the medium term and closer to the upper bound. Therefore, the MPC decided to maintain the MoPR at 2.65 percent.

The MPC notes the growth-enhancing economic transformation reforms and supportive macroeconomic policies being implemented.

Access to credit 

“These include accommodative monetary conditions, improvement in water and electricity supply, implementation of the Economic Recovery and Transformation Plan and the two-year Transitional National Development Plan, as well as reforms to further improve the business environment (for example, the promulgation of the Credit Information Act and the Movable Property Act, both of which have the potential to make credit more accessible),” the MPC says.

Additionally, the MPC notes that the recent announcement of the agreement in principle between the Government of Botswana and De Beers Group on a new Debswana Mining Licence and new Sales Agreement is expected to be positive for medium-term growth.