The Central Bank left its benchmark lending rate unchanged at six percent on Wednesday, saying the current policy stance was achieving the bank’s inflation and growth targets.
“The inflation forecast suggest that the prevailing monetary policy stance is consistent with maintaining inflation within the Bank’s medium-term objective range of 3 ÔÇô 6%,” the Bank of Botswana said in a statement.
At the same time the bank said it expect GDP growth at 1.2 percent in the twelve months to September 2015 compared to 4.1 percent growth in the same period in 2014.
“GDP growth is estimated at 1.2% in the 12 months to September 2015 compared to the revised 4.1% in the corresponding period in 2014, thus reflecting the contraction of 11.8 % in mining production. Non-mining output increased by 3.7%,” the Central Bank statement partly read.
Latest figures show that domestic inflation fell from 3.1 percent in December to 2.7 percent in January 2016. Low domestic demand pressures and subdued foreign price developments contribute to the positive inflation outlook in the medium term. Bank of Botswana says this outlook is subject to downside risks arising from sluggish global economic activity and the resultant weakening commodity prices. The bank says the projection could however be adversely affected by any unanticipated large increase in administered prices and government levies as well as international oil and food prices beyond current forecasts.
Meanwhile the bank’s monetary policy is also aligned with the need to safeguard financial stability in the country.
Despite the bank’s assurance, there has been a general upsurge in household spending in Botswana, with majority going to consumption rather than investment. Statistics indicate that most Batswana spend on goods such as house furniture, cars, clothing, utilities (electricity and water) and housing.
Lack of a comprehensive credit database by the financial system played a contributing factor to the overblown household debt, a financial clog that has trapped many households. BoB asserts however that household debt has not reached crisis level and is therefore a manageable situation.
“Credit growth is considered to be at a sustainable level; it is posing no threat to financial stability,” the bank said on Wednesday.
