The country’s central bankers have affirmed that the current liquidity levels in the market are sufficient, thereby indicating no immediate need to revise the primary reserve requirements (PRR) for commercial banks.
In the banking world, primary reserve requirements for commercial banks refer to the regulations set by central banks or regulatory authorities specifying the minimum amount of reserves that banks must hold in the form of cash or deposits with the central bank. These requirements are a key tool used by central banks to influence the liquidity levels in the banking system and thereby control the money supply and credit availability in the economy.
Speaking to journalists in Gaborone, Caster Moseki, Director of Financial Markets at the central bank, clarified that the primary reserve requirement is typically utilized during periods of structural liquidity challenges.
Moseki highlighted the adjustments made during the Covid-19 pandemic, where the central bank intervened to bolster liquidity in the market, increasing it from five billion Pula to nearly 20 billion Pula currently. He emphasized that the monetary policy rate (MoPR) instrument is currently effective in managing liquidity, eliminating the necessity for changes in the primary reserve requirement at this time.
“There is no need to use the PPR; MoPR is considered adequate enough, with room even for further cuts if necessary,” Moseki added.
Deputy Governor Dr. Tshokologo Kganetsano echoed Moseki’s sentiments, noting that while the primary reserve requirement (PPR) remains a policy tool available to the central bank, it is not actively utilized under current conditions.
The Monetary Policy Committee (MPC), including external members, recently announced a 25 basis point reduction in the Monetary Policy Rate (MoPR). Bank Governor Cornelius Dekop explained during a press briefing that this decision was driven by the economy’s projection to operate below full capacity, without generating significant demand-driven inflationary pressures.
Dekop also highlighted that Botswana’s consumer inflation had decreased to three percent year-on-year in May from 3.1 percent in April 2024, aligning with the lower boundary of the central bank’s medium-term objective range of 3 – 6 percent. Looking ahead, Dekop indicated that inflation is expected to remain within the objective range, averaging 3.6 percent in 2024 and 4.5 percent in 2025.
