Botswana's policy will spur economic growth, says central bank

Diamond mines in Botswana. South Africa's neighbour, the world's biggest producer of diamonds, expects its GDP to expand at about 5% this year. (Philip Mostert)

Diamond mines in Botswana. South Africa's neighbour, the world's biggest producer of diamonds, expects its GDP to expand at about 5% this year. (Philip Mostert)

Botswana's central bank will continue to try to boost economic growth by keeping its repo rate at 7.5%.

Botswana’s central bank said it will stick to its accommodative monetary policy to help support economic growth that’s set to slow because of power shortages.

The economy of the world’s biggest producer of diamonds will probably expand 5.1% this year, Kealeboga Masalila, the head of monetary and financial stability at the Bank of Botswana, told reporters on Monday in the capital, Gaborone. The economy grew 5.9% last year.

“Electricity and water challenges will hinder growth,” Masalila said. “Diamond production and an accommodative monetary stance will help to support economic activity via interest-rate adjustments.”

The central bank has kept its benchmark interest rate unchanged since lowering it by half a percentage point to 7.5% in December. Inflation in the landlocked nation north of South Africa will probably remain inside the 3% to 6% target band in the medium term, Masalila said.

Botswana’s currency, the pula, is pegged to a basket of currencies that includes South Africa’s rand. Masalila said the rand appears to have “stabilised” against major currencies. – Bloomberg

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