Bank of Botswana (BoB) says there is need for “caution” when dealing with issues related to wage adjustment in both public and private sector as any movement that is above or below normal could affect the level of the domestic inflation.
The bank officials were addressing journalists last week following the release of the bank’s Monetary Policy Statement.
The bank’s top executives indicated that currently inflation was stable but fluctuating around the lower desired objective range of 306 percent. The bank warned that any drastic change in wages could harm positive prospects of domestic inflation.
As part one of its key decisions to control spending, the bank’s Monetary Policy Committee (MPC) said last week that it had decided to maintain the bank rate at 5.5 percent.
The composition of the MPC was made public for the first time on Tuesday and is made up of the bank’s staff which is hand-picked by the bank governor.
Bank Governor Moses Pelaelo noted that Botswana’s wages grew faster than the rate of inflation by the end of 2016.
According to Pelaelo, the domestic economy registered an increase in wages of about 5.2 percent during 2016. He further noted that the rise in wages, both for public and private sector has had a modest impact in the domestic demand and inflation.
“Turning to wage developments, it is notable that government recurrent expenditure included a 3 percent salary increase for the public service, which is guided by parastatal and private sector wage adjustments. Thus, in 2016, wages increased, generally, by 5.2 percent, therefore, with a modest impact on demand and inflation,” Pelaelo said.
The inflation/wages figures from BoB come at a time when the annual inflation rate went down to 3.1 percent in January 2017 reflecting an increase of 0.1 of a percentage point on the December 2016 rate of 3.0 percent.
In its latest data, Statistics Botswana (SB) said that the national Consumer Price Index (CPI) moved from 100.5 in December 2016 to 101.0 in January 2017, an increase of 0.4 percent.