GABORONE, Feb 26 – The Bank of Botswana has kept its benchmark interest rate unchanged at 3.5%, marking the second consecutive policy meeting without an adjustment, as inflation remains stable within the central bank’s target range.
Annual inflation stood at 4.1% in January, positioning it comfortably within the bank’s 3% to 6% target band. The central bank expects inflation to average 4.5% in 2026 and rise slightly to 4.7% in 2027, reflecting a broadly stable price outlook.
Despite the steady inflation environment, Governor Lesego Moseki highlighted several potential risks that could push prices higher. These include proposed electricity tariff increases and the outbreak of foot-and-mouth disease, which could disrupt agricultural supply and drive food costs upward.
The interest rate decision comes as Botswana works to recover from two consecutive years of economic contraction. The central bank forecasts economic growth of 3.1% this year, signalling a return to expansion after recent declines.
The recovery is expected to be led primarily by non-mining sectors, as Botswana accelerates efforts to diversify its economy away from heavy reliance on diamond exports.
Diamonds remain central to Botswana’s economy, accounting for roughly one-third of government revenue and approximately three-quarters of foreign exchange earnings. However, a prolonged downturn in global diamond demand has weighed heavily on national economic performance.
By maintaining its current policy stance, the central bank aims to balance inflation control with the need to support economic recovery and encourage sustainable growth during a period of structural transition.
