Botswana Keeps Policy Rate Steady at 1.9% Summary: • The Bank of Botswana’s Monetary Policy Committee held the Monetary Policy Rate at 1.9 %, keeping the Standing Deposit and Standing Credit Facility rates at 0.9 % and 2.9 %, respectively. • Headline inflation is 1.1 % now but projected to average 3.5 % in 2025 and 5.9 % in 2026, temporarily exceeding the 3–6 % target band due to exchange-rate effects, higher utility prices and other imported cost pressures. • Domestic demand is subdued: real GDP contracted 1.7 % year-on-year to March 2025, and growth is forecast to turn negative. • Given weak activity, the Committee opted to maintain an accommodative stance and liquidity-support measures, judging this will aid the fragile economy while allowing inflation to return to target over the medium term.

Decision

Maintain

Rate change

0 bps

monetary policy rate

1.9%

The Monetary Policy Committee of the Bank of Botswana kept the Monetary Policy Rate (MoPR) at 1.9 percent at its 21 August 2025 meeting, judging that subdued demand and a 1.7 percent year-on-year GDP contraction to March 2025 allow policy to remain accommodative even as exchange-rate adjustments, higher administered prices and banks’ rate increases are set to lift inflation temporarily above the 3–6 percent objective band in Q2 2026, with the Bank projecting averages of 3.5 percent for 2025 and 5.9 percent for 2026. The rate has been unchanged at 1.9 percent since August 2024. Implementation tools remain aligned with the MoPR: 7-day Bank of Botswana Certificates, repos and reverse repos are priced at 1.9 percent, while the Standing Deposit and Credit Facilities stay at 0.9 percent and 2.9 percent, and repo maturities have been lengthened to up to 30 days alongside a cut in the primary reserve requirement to zero that released BWP 1.8 billion to alleviate a banking-sector liquidity squeeze reflected in elevated wholesale deposit and prime lending rates. July headline inflation eased to 1.1 percent, below target, but upside risks stem from the pula’s wider trading margins, higher utility tariffs and possible commodity price gains, although weak domestic demand and fiscal constraints could temper pressures. Externally, newly announced US tariffs of 10 percent on global imports—15 percent on Botswana’s exports—plus broader geopolitical tensions threaten diamond exports and global activity. The central bank reiterated it will maintain an accommodative stance, continue close engagement with banks to ease liquidity strains and stands ready to deploy further prudential actions to safeguard monetary transmission and financial stability.