Bank of Botswana rebuts report it warned banks over prime lending rate hikes and signals steps to enforce customer disclosure

The Bank of Botswana issued a media release rejecting a newspaper account that attributed to its Monetary Policy Committee a warning that banks had breached regulation by raising borrowing rates without the regulator’s consent. It clarified that commercial banks did not violate regulatory requirements when they increased prime lending rates (PLRs) in 2025 because the setting of PLRs was liberalised in April 2023, while the Monetary Policy Rate (MoPR) remains the primary anchor for market interest rates. Banks had disclosed to the Bank their rationale for PLR increases and are expected to communicate such changes transparently to customers and the public, with steps to be taken to ensure compliance going forward. The Bank linked PLR increases to heightened funding costs from tighter liquidity conditions, but warned that excessive rises in lending rates could undermine its accommodative monetary policy stance; it is monitoring liquidity conditions and commercial banks’ business conduct. It also reiterated expectations that PLR adjustments reflect competitiveness and reasonableness without collusion, noting that banks have submitted their PLR-setting methodologies and frameworks, while highlighting a misalignment between PLR movements and the MoPR in the context of liquidity challenges. As part of measures announced at the 19 June 2025 MPC media briefing to address structural liquidity constraints, the Bank pointed to extending repurchase agreement tenors from up to seven days to up to one month, alongside other actions taken since August 2024, to reduce the frequency of banks’ central bank funding needs and lower the risk of funding disruptions.