Bank of Botswana's Financial Stability Council (FSC) published the outcome of its 6 November 2025 meeting, concluding that Botswana's financial system remains resilient and continues to provide financial services to households and businesses without constraint. It nevertheless identified persistent macro-financial risks, including subdued growth, liquidity distribution risks, climate-related risks and sectoral vulnerabilities, that require continued vigilance and, in some cases, proactive policy responses. Macroprudential indicators were described as favourable, including a non-performing loans ratio of 3.2 percent (June 2025) and a negative credit-to-GDP gap, while banking and non-bank financial institutions were assessed as safe and sound with adequate capital buffers, liquidity and profitability. Risks highlighted for closer monitoring included high household credit concentration and rising debt-service-to-income ratios for a significant share of households, particularly those reliant on unsecured credit, as well as sovereign-sector pressures linked to constrained fiscal space and reduced external buffers amid weak diamond markets, which the FSC associated with tighter banking sector liquidity, higher funding costs and rising lending rates. The council also noted modest easing in global financial conditions alongside intensifying vulnerabilities, and warned that the expansion of NBFIs into traditional credit intermediation increases market and liquidity risk exposures with potential spillovers into core banking systems; it endorsed strengthened cross-sector supervision, recent Monetary Policy Committee decisions to address liquidity distribution challenges and anchor the Pula exchange rate, and further work on stress testing, macroprudential oversight and crisis preparedness. Regulatory developments cited as strengthening resilience included the commencement of the Banking Act, 2023, the Banking (Amendment) Regulations, 2025 and Banking (Deposit-Taking Institutions) Regulations, 2025, and the establishment of the Banking Appeals Tribunal, alongside reforms covering collective investment undertakings, electronic payment services and the NBFIRA Act, 2023, and ongoing AML/CFT/CPF enhancements. The FSC pointed readers to the October 2025 Financial Stability Report for detailed risk analysis and scheduled its next regular meeting for May 2026.
Bank of Botswana 2025-11-07
Bank of Botswana Financial Stability Council judges the financial system resilient but flags liquidity distribution and household debt risks
The Bank of Botswana's Financial Stability Council reported the financial system remains resilient but highlighted macro-financial risks like subdued growth and liquidity challenges. Key risks include high household credit concentration, rising debt-service-to-income ratios, and sovereign-sector pressures from weak diamond markets. Regulatory developments enhancing resilience include the Banking Act, 2023, and related amendments, alongside reforms in investment and payment services.