Botswana's central bank left its benchmark Bank Rate steady at 6.0 percent, reiterating its view from February that the "current state of the economy, domestic and external economic outlook and the inflation forecast suggest that the prevailing monetary policy stance is consistent with maintaining inflation within the Bank's medium-term objective range of 3 - 6 percent."
The Bank of Botswana (BoB), which has maintained its rate since cutting it by 50 basis points in August 2015, added in its statement from April 26 that credit growth was at a sustainable level and posed no threat to financial stability.
Botswana's inflation rate was unchanged at 3.0 percent in March and February while the exchange rate of the pula has been appreciating since mid-January.
The pula was quoted at 10.73 to the U.S. dollar today, up from 11.26 at the end of 2015 for a rise of 4.9 percent.
Botswana's economy was estimated to have contracted by 0.3 percent in 2015 after growth of 3.2 percent in 2014, mainly due to a 19.7 percent decline in mining output on lower demand for diamonds and copper. This has had a spillover effect on non-mining activities, along with regional drought and shortages of electricity and water.
The central bank said the outlook was subject to downside risks from sluggish global growth and weaker commodity prices while the outlook could be "adversely affected" by large increases in administered prices and government fees as well and higher-than-expected oil and food prices.
Last month the International Monetary Fund (IMF) forecast a gradual economic recovery in Botswana over the next three years based on higher diamond prices and the impact of fiscal stimulus while inflation is expected to remain within the bank's target range.
The IMF forecast economic growth of 3.7 percent this year and average inflation of 3.4 percent.
