Bank of Botswana has kept benchmark interest rate stable, arguing that the economic fundamentals are well in order to tame inflation within the medium term range. The Monetary Policy Committee (MPC) meeting, which was the last for Governor Linah Mohohlo, decided to keep rates at 5, 5 percent. “The current state of the economy and both the domestic and external outlook, including inflation forecast, suggest that the prevailing monetary policy stance is consistent with maintaining inflation within the bank’s medium term objective range,” said the bank earlier in the week.
BoB has set inflation target at 3-6 percent in the medium term. Botswana’s western neighbour, Namibia also joined the local central bank in keeping rates stable at 7 percent for the fourth time in a row on Wednesday. Meanwhile, the MPC said the monetary policy is also aligned to safeguard financial stability. “In this respect, credit growth is considered to be at sustainable levels; posing no threat to financial stability,” said the MPC. The total credit extended to consumers within the banking industry increased sharply during the month of July, the bank said previously.
During that month credit ballooned by 8, 8 percent year on year. Credit extended to households and businesses jumped by 10, 9 percent and 6, 1 percent respectively. In August, the bank reduced interest rate from 6 percent to 5 percent, in a bid jack up the mining-led economy.
The domestic economy has been struggling in the past few years on the backdrop of poor mining performance. In the same period, mining, which is led by diamonds declined by 23 percent. Real Gross Domestic Product is estimated to have contracted by 0, 3 percent in the 12 months to June 2016. In the same period last year, the landlocked economy leapfrogged by 3, 1 percent. Non-mining output for the period under review grew by 4 percent, said the bank. Tourism and communications services are some of the sectors which boosted non-mining.