Thursday, October 22, 2020

BoB leaves inflationary target on hold

The central bank last week decided to keep inflation target range on hold as a strategic plan to see where wind is blowing regarding the oil prices.
However, its decision was met with a clarion call from the investment community, which was calling for a deeper interest rate cut following an announcement by the Central Statistic Office that inflation had slipped from a double digit to 7.4 percent on Monday.

?I do hope that there is a cut so that the economy can start kicking,? he said.

However, FNBB enjoyed a growth in the loan book compared to other banks but hopes that the mining boom in the northern part of the country add steam to its book once it takes off,? the Managing Director of FNBB, Danny Zandamela, said on Tuesday.

His call for a rate cut was made by other investors, such as Botswana Insurance Holding Limited and Barclays Bank of Botswana, who suffer dearly due to the high interest rate that prevailed over the past year.

In the past year, inflation ballooned to about 14 percent as Bank of Botswana was trying in desperate attempt to tame it within 4-to-7 percent range. Further, some of its monetary policy mechanisms, such as credit growth, collapsed as it shot above 11- to?14 percent range to 18.6 percent.

?The overall effect of demand pressure on inflation pressure was moderate, particularly given a relatively restrictive monetary policy and a lower growth rate in government expenditure in 2006, compared with the budget annual increase for fiscal year 2006/07.

?However, credit to the private sector accelerated from 7.4 percent in December 2005 to 18.6 percent at the end of 2006, and was, for the last two months of the year, above the upper end the 11-14 percent range, which was considered consistent with the Bank?s 2006 inflation objective,? Bank Governor Linah Mohohlo said Monday.

?It is, therefore, important that, in the absence of a rapid reduction in demand and inflation, monetary policy should remain relatively tight to restrain the second- run effects of the increase in administrative prices and to sustain expectation of a fall in inflation towards the Bank?s medium- term objective for 2007.

?Hence, the Bank has decided to maintain the 4-7 percent inflation objectives for 2007,? she added.
Barclays? Managing Director, Thuli Johnson, said his corporate lending sector was flat at P 100 million as institutions were shunning the interest rates environment in the country, but he was a bit optimistic on the outlook for the year.

?The outlook is that inflation will decline slightly and we are forecasting growth of 5-to- 7 percent.
?There are also opportunities in northern Botswana due to mining. We also see opportunities in PPPs where we have been short-listed as the preferred bidder in two projects,? Johnson said, adding that corporate lending is expected to remain tight over the year.

Regina Vaka, head of Botswana Life said the high inflationary environment led most of the people to cancel their insurance policies which cost them about P 28 million.

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