The bank of Botswana has announced a decision to hold its main interest rate at 1.90% noting that the economy will perform below capacity in the last quarter of the year. This projection is based on the slump in the global diamond market leading to a revenue shortfall.
Botswana is reliant on revenue from the export diamond and a decline in the sale of the precious stone has affected government spendings leading to budget cuts.
“The economy will contract this year primarily due to the downturn in the global diamond market and moderately recover next year,” central bank Governor Cornelius Dekop told a news conference.
Also, the drop in diamond export means there will not be a demand-driven inflationary pressure hence holding the rate will help manage the situation better.
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In addition, Dekop said inflation will average 2.9% in 2024 and move to about 3.3% in 2025, compared with forecasts of 2.8% and 3.1% given at the bank’s previous monetary policy meeting last month.
The Bank of Botswana wants to tame the inflation rate between 3% and 6% over the medium term by keeping the lending rate within what the economy can sustain.
The current economic downturn presents a huge test for the newly elected President Duma Boko after shock over the long-governing Botswana Democratic Party.
