The central bank of Botswana has decided to lower interest rates by 25 basis points to 1.9% despite a recent uptick in inflation. This marks the third consecutive rate reduction within a year, following cuts in December 2023 and June 2024.
Headline inflation for July has climbed to 3.5%, aligning with the bank’s objectives.
During the Monetary Policy Committee (MPC) meeting on Thursday, Bank of Botswana governor Cornelius Dekop expressed hopes that this move would help stimulate the country’s economy.
While Botswana’s inflation is expected to see a slight rise in the medium term, it is projected to remain within the bank’s target range of 3-6%, with an average of 3% anticipated for 2024.
The reduction in the lending rate aims to encourage lending and bolster Botswana’s economy. The International Monetary Fund (IMF) recently revised its forecast for Botswana’s economic growth in 2024 to 1%, down from an earlier projection of 3.6% due to sluggish performance.
The decline in economic growth can be attributed to a significant drop in diamond trading and mining activities, which constitute a substantial portion of exports, fiscal revenues, and GDP in Botswana.
Reports indicate that Botswana’s diamond production in the first half of 2024 decreased by 24% compared to the same period in the previous year, as reported by Anglo American, the owner of De Beers.
