- Will maintain borrowing rate at 3.75%
- Growth enhancing environment positive
- Successful implementation of ERTP vital
The short-term adverse developments in the domestic economy occur against a growth enhancing environment that instills confidence that the economy is poised for a strong rebound, the Bank of Botswana’s (BoB) Monetary Policy Committee (MPC) has noted.
According to the Governor of BoB Moses Pelaelo, the growth enhancing environment includes accommodative monetary conditions, improvements in water and electricity supply, reforms to further improve the business environment and the government’s vaccination rollout programme and other interventions against COVID-19.
“In addition, the successful implementation of ERTP should anchor the growth of exports and preservation of a sufficient buffer of foreign exchange reserves, which have recently fallen to an estimate of P47.9 billion (9.8 months of import cover) in September 2021,” Pelaelo said at the latest MPC briefing of journalists recently.
“Overall, it is projected that the economy will operate below full capacity in the short to medium term and, therefore, not creating any demand-driven inflationary pressures, going forward.”
ERTP is the Economic Recovery and Transformation Plan of the government to support restoration of economic activity and incomes.
Pelaelo said real GDP grew by 4.9 percent in the 12 months to June 2021 compared to a contraction of 5.1 percent in the corresponding period in 2020.According to central bank governor, the increase in the output is attributable to expansion in production of both the mining and non-mining sectors resulting from an improved performance of the economy from a low base in the corresponding period in the previous year.
“Mining output increased by 3 percent in the year to June 2021 because of the 3.2 percent increase in a diamond mining output, compared to a contraction of the 19.3 percent in 2020,” he said. “Similarly, non-mining GDP grew by 5.4 percent in the 12-month period ending June 2021, compared to a decrease of 0.7 percent in the corresponding period in 2020.
“The increase in non-mining GDP was mainly due to expansion in output for the construction, diamond traders, transport and storage, wholesale and retail and real estate.”
Regarding inflation, Pelaelo said it is expected to revert into the bank’s objective range of 3-6 percent in the second quarter of 2022. In this context, the MPC has decided to continue with its accommodative monetary policy stance and maintain the Bank Rate at 3.75 percent once again.
Meanwhile, projections by the Ministry of Finance and Economic Development and the International Monetary Fund (IMF) also point to a strong rebound in economic growth for
Botswana in 2021. The ministry projects a growth rate of 9.7 percent in 2021, moderating to a growth of 4.3 percent in 2022.
This compares well with the IMF that forecasts the domestic economy to grow by 9.2 percent in 2021 to moderate to 4.7 percent in 2022.