Picture: 123RF/Teguh Jati
Picture: 123RF/Teguh Jati

Gaborone — Botswana’s central bank cut its benchmark interest rate for the first time in two years, to the lowest level since at least 2007 as it seeks to boost economic growth.

The monetary policy committee (MPC) reduced the rate by a quarter percentage point to 4.75%, governor Moses Pelaelo told reporters on Thursday in the capital Gaborone. That is the first cut since October 2017, when the central bank reduced it by 50 basis points.

Inflation is seen as remaining weak given subdued demand pressures in the economy. “Accommodative monetary policy” should help the economy expand an estimated 4.2% in 2019 and 4.4% in 2020, Pelaelo said.

Consumer inflation was 2.9% in July, below the central bank’s 3% to 6% target range. It hasn’t breached the upper end of the band since at least 2014. Botswana imports much of its goods from neighbour SA, where inflation eased to 4% in July.

“We believe price stability has been achieved,” Tshokologo Kganetsano, the central bank’s director for research and an MPC member, said. “We expect inflation to remain within that range and the decision to cut the rate is to promote economic activity.”

Ceicdata.com says Botswana's unemployment rate increased to 17.94% in December 2018.