Botswana’s central bank on Thursday left its benchmark interest rate unchanged for a second consecutive meeting, citing stable inflation within its target band despite economic pressures linked to weak global diamond demand.
The Bank of Botswana maintained its main monetary policy rate at 3.5 percent, saying current price developments and inflation forecasts supported a cautious policy stance.
Annual inflation stood at 4.1 percent in January, remaining near the midpoint of the bank’s 3–6 percent objective range.
Authorities project inflation to average about 4.5 percent in 2026 and edge slightly higher to 4.7 percent in 2027, still within the acceptable target corridor.
Central bank governor Lesego Moseki said the decision reflected expectations that inflationary pressures would remain broadly contained in the medium term, even as external and domestic risks persist.
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However, Moseki warned of potential upside risks to prices, including proposed electricity tariff increases and an outbreak of foot-and-mouth disease that could push food costs higher.
The rate decision comes as Botswana’s economy continues to feel the effects of subdued activity in the global diamond market, a critical sector for the southern African nation.
Diamonds account for roughly one-third of government revenue and about three-quarters of Botswana’s foreign exchange earnings, leaving the economy vulnerable to fluctuations in global demand.
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Economic growth is projected to recover to about 3.1 percent this year following two consecutive years of contraction, according to official forecasts aligned with the country’s recent national budget.
Officials expect the rebound to be driven largely by expansion in non-mining industries as Botswana intensifies efforts to diversify away from heavy dependence on diamond exports.
The government has increasingly prioritised sectors such as tourism, financial services and manufacturing to strengthen resilience against commodity price shocks.
Analysts say maintaining accommodative monetary conditions could help support domestic economic activity while safeguarding price stability, particularly as global economic uncertainty continues to weigh on export-dependent economies.
The central bank noted that monetary policy would remain data-dependent, with authorities prepared to adjust rates should inflation deviate from projections or external risks intensify.
Botswana has long been regarded as one of Africa’s most fiscally stable economies, but slower diamond sales and shifting global luxury demand have underscored the urgency of broadening growth drivers.
For now, policymakers appear focused on balancing support for economic recovery with vigilance against emerging inflation risks as the country navigates a gradual post-contraction rebound.
