Good morning, let’s get into it!
The Monetary Policy Committee (MPC) met yesterday and decided to maintain the Monetary Policy Rate (MoPR) at 3.50%.
The Rationale: While inflation ticked up slightly in January (to 4.1%), the Bank believes this is a temporary adjustment. They are betting that maintaining current rates will help the economy recover from the 0.4% contraction seen in 2025 without letting inflation spiral.
Prime Rate Protected: Crucially for local businesses and borrowers, the Bank has instructed commercial banks not to increase their prime lending rates, which remain at 7.19%.
2. The "New Dawn" Strategy (MPS Release: Feb 25)
Governor Lesego Caster Moseki launched the 2026 MPS on Wednesday, framing it as a transition from "diamond dependency" to a more diversified economy.
Forward-Looking Inflation: The Bank forecasts that inflation will stay within the 3% to 6% objective range throughout 2026.
GDP Growth: They are projecting a growth rebound to 3.1% in 2026, driven by mining recovery and the new Economic Transformation Program.
3. Currency Management & Exporters
A major highlight of the 2026 stance is the change in how the Pula is traded to help build foreign reserves:
Asymmetric Trading: The Bank reduced the "buy rate" for foreign exchange from 7.5% to 3% (relative to central parity), while keeping the "sell rate" at 7.5%.
Impact: This essentially makes it more attractive for exporters and investors to bring foreign currency back into Botswana, helping the Bank accumulate reserves that were slightly eroded during the 2024–2025 diamond market slump.
4. Monetary Policy Transmission Concerns
During the launch, there was an interesting focus on "trust infrastructures." The Bank acknowledged a "trust deficit" in how its policy signals move through the market. They are prioritizing clearer communication to ensure that when they adjust the MoPR, the real-world impact on businesses and consumers is more predictable.
Quick Stats Snapshot
Indicator | Current Rate | Status |
Monetary Policy Rate (MoPR) | 3.50% | Unchanged |
Headline Inflation (Jan 2026) | 4.1% | Increasing slightly (up from 3.9%) |
Prime Lending Rate | 7.19% | Capped |
GDP Forecast (2026) | 3.1% | Optimistic (up from -0.4% in 2025) |
The most important angle is likely the Bank's "Asymmetric Trading" move—it's a clear signal that they are shifting gears to protect the national balance sheet.
Primary Institutional Sources
Bank of Botswana (BoB): * Monetary Policy Statement (MPS) 2026: Released on February 25, 2026. This is the source for the "New Dawn" theme, the 3.1% GDP growth forecast, and the new asymmetric exchange rate trading margins.
MPC Decision Press Release: Published on February 26, 2026, confirming the MoPR remained at 3.5% and the directive for commercial banks to hold prime rates.
Statistics Botswana:
Consumer Price Index (CPI) Report - January 2026: Published in mid-February 2026, confirming the rise in headline inflation to 4.1% and the 6.1% increase in food prices.
