Botswana’s central bank kept its monetary policy rate unchanged for a second consecutive meeting on Thursday, saying it needed to carefully assess the potential second-round effects of higher domestic fuel prices and electricity tariffs.
Annual inflation in the Southern African country stood at 9.4% year-on-year in July, down from 10.7% in June but still well above the central bank’s medium-term target range of 3% to 6%.
Governor Lesego Moseki said inflation was expected to remain above the target range until the first quarter of 2027, adding that continued vigilance and careful management of inflation expectations would be necessary to support a return to the target range.
The central bank’s decision to maintain its policy rate comes as higher domestic energy costs continue to pose a risk to broader price stability.
Moseki said the bank needed to monitor how increases in fuel prices and electricity tariffs could filter through to other goods and services before making further adjustments to monetary policy.
Despite the persistent inflationary pressures, the central bank lowered its average inflation forecast for 2026 to 7.9%, from its previous projection of 9.0% in June.
Inflation is expected to moderate further to 4.9% in 2027, compared with the earlier forecast of 5.5%.
Botswana’s economy is also facing pressure from a prolonged downturn in the global diamond market, which has significantly affected the country’s economic performance.
The diamond industry remains a major contributor to Botswana’s economy, and the downturn has contributed to successive contractions in gross domestic product over the past two years.
The central bank’s decision to maintain its policy rate therefore comes amid a challenging economic environment, with policymakers balancing elevated inflation against weak economic activity.
For now, the central bank is expected to continue monitoring domestic price developments, inflation expectations and the wider economic impact of higher energy costs as it works towards bringing inflation back within its target range.
