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Bank of Botswana maintains bank rate at 5 %

Publishing Date : 19 February, 2018


Bank of Botswana (BoB) has maintained the country’s Bank Rate at 5 %. This was announced at a press briefing on Tuesday at the country‘s central bank head quarters. This is a decision arrived at by the Bank’s Monetary Policy Committee after consideration of the country’s economic outlook.

The committee also took into account regional economic determinants as well as other macroeconomic developments and expectations on finance, trade and investment trends, GDP, inflation amongst others. When delivering the statement before members of the press, BoB Governor Moses Pelaelo said the outlook for price stability will remain positive as inflation was forecasted to be within the 3–6 percent objective range in the medium term.

He underscored that the inflation increased from 2.9 percent in November to 3.2 percent in December 2017, explaining that the subdued domestic demand pressures and the modest increase in foreign prices contribute to the positive inflation outlook in the medium term. “This outlook is subject to upside risks emanating from improving global economic activity and the rise in commodity prices beyond current forecasts,” he said. It was also highlighted that any substantial unanticipated upward adjustment in administered prices and government levies and/or taxes also present upside risks to the inflation outlook.  

Botswana ‘s real Gross Domestic Product (GDP)  grew by 1.8 percent in the twelve months to September 2017 compared to a growth of 2.3 percent in the corresponding period ending in September 2016. The slower growth reflects a 3.8 percent increase in non-mining activity, compared to 4.5 percent in the same period. Mining output, however, contracted by 12.3 percent in the twelve months to September 2017 compared to a decline of 11 percent in the previous period. Bank of Botswana projects GDP to expand in the short-to-medium term, driven largely by the recovery in mining activity.

Furthermore, the projected accommodative monetary conditions in the domestic economy and expansion in government expenditure in the 2018/19 fiscal year, as well as stability in water and electricity supply, are expected to support growth of the non-mining sectors. The Governor reiterated that on overall analysis, the economy is expected to operate close to, but below capacity in the medium term.   

Deliberating on global factors which are predominantly influenced by macroeconomic activities of major economies like the United States, China and Japan amongst others, Pelaelo noted that global output growth was estimated at 3.7 percent in 2017 compared to 3.2 percent in 2016. He said it is projected at 3.9 percent in 2018 and 2019, reflecting expected broad-based improvement in economic performance.

“However, protectionist trade policies, potential build-up of financial vulnerabilities induced by easy financial conditions, geopolitical tensions, political uncertainty and adverse weather conditions could negatively affect the medium-term growth prospects,” he said.  Regionally, economic expansion in South Africa is projected to remain subdued in 2018 owing to persistent restrained demand and uncertain political environment that weighs on business confidence and investment.  

In conclusion the BOB head explained that the current state of the economy of Botswana and the outlook for both domestic and external economic activity suggested that the prevailing monetary policy stance was consistent with maintaining inflation within the objective range of 3–6 percent in the medium term

On crypto-currencies

On the famous digital currencies in the name of Bitcoin and others, Governor Pelaelo warned the general public about the latter. He said Botswana only uses one currency. “We only have one legal tender which is Botswana Pula, currently as Botswana we do not have legal foundation on crypto-currencies,” he said.

He further warned that by investing in any of the crypt-currencies, the public is “gambling” on its own. He however said that should anyone make any revenue from crypto-currencies, they would have to pay tax in pulas and in that process may incur gross losses. “You are on your own, yes some people are making money from this but it’s not guaranteed, no central bank in the world authorizes any transaction made in these currencies, it is not even a currency it’s an asset class in the sense that is just a commodity, so you are investing your money at your own risk,” cautioned Pelaelo. Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of Bitcoin is carried out collectively by the network.



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