The Bank of Botswana has increased the Monetary Policy Rate by 200 basis points from 3.5 percent to 5.5 percent following a meeting of its Monetary Policy Committee on April 30, 2026. The central bank stated that the decision is intended to strengthen policy transmission. Commercial banks have been directed not to increase their prime lending rates.
The adjustment also includes aligning key monetary operations with the new rate. The 7 day Bank of Botswana Certificates auctions, repos and reverse repos will be conducted at 5.5 percent. The Standing Deposit Facility rate has been set at 4.5 percent, while the Standing Credit Facility rate has been raised to 6.5 percent.
The decision was taken against a backdrop of continued global economic uncertainty. The central bank noted ongoing supply chain disruptions, shifting trade relations and heightened geopolitical tensions, including the impact of conflict in the Middle East on commodity markets, inflation expectations and financial conditions. Global economic growth is projected to remain subdued in 2026.
The central bank projects inflation to average 8.7 percent in 2026 before easing to 5.6 percent in 2027. Risks to the outlook include potential second round effects from fuel price increases, possible increases in administered prices such as electricity tariffs and public transport fares, and higher food prices linked to the outbreak of foot and mouth disease and related restrictions.
Domestically, Botswana’s real gross domestic product contracted by 0.7 percent in 2025, compared with a contraction of 2.8 percent in 2024. The smaller decline was attributed mainly to a reduced contraction in diamond mining, while growth in the non mining sector remained modest. Growth is projected to recover to 3.1 percent in 2026, supported by stronger performance in non mining sectors and ongoing economic diversification initiatives.
Inflation increased from 4 percent in February 2026 to 4.2 percent in March 2026, remaining within the central bank’s objective range of 3 to 6 percent. The increase was driven by higher prices for transport and food and non alcoholic beverages. Inflation is expected to rise significantly in the short term and exceed the upper bound of the target range in the second quarter of 2026. This is attributed to increases in domestic fuel prices, public transport fares and medical aid premiums.
The Bank of Botswana stated that it will continue to monitor economic developments and implement appropriate measures to maintain price stability and safeguard financial system stability.
The central bank projects inflation to average 8.7 percent in 2026 before easing to 5.6 percent in 2027. Risks to the outlook include potential second round effects from fuel price increases, possible increases in administered prices such as electricity tariffs and public transport fares, and higher food prices linked to the outbreak of foot and mouth disease and related restrictions. External factors, including higher global prices for oil, gas and other inputs, may also contribute to inflationary pressures.
The Monetary Policy Committee stated that the increase in the policy rate is part of a recalibration to reinforce policy transmission and signalling. The bank also noted concerns that some commercial banks continue to widen lending margins above prime lending rates, which may weaken the intended impact of monetary policy.
To address structural issues in the banking system, including deposit concentration and uneven liquidity distribution, the central bank indicated that commercial banks will be required to hold additional capital for deposit concentration risk under Basel III standards by the end of the fourth quarter of 2026.
The Bank of Botswana stated that it will continue to monitor economic developments and implement appropriate measures to maintain price stability and safeguard financial system stability.
