18th June 2026
Own Correspondent
The Bank of Botswana Monetary Policy Committee(MPC) revealed it has decided to maintain the Monetary Policy Rate at 5.5 percent with the global economy continuing to face challenges of evolving trade relations, supply chain disruptions, and geopolitical tensions.
Recent US-Iran peace negotiations have however improved market sentiment.
The MPC therefore projected that inflation will remain above the 3 – 6 percent objective range in the near term, while growth will continue to be subdued due to adverse external developments and thus far, modest progress in implementation of transformative initiatives.
Lesego Caster Moseki, Governor of the Bank of Botswana, said “Global economic growth is expected to remain subdued in 2026, reflecting weaker economic activity, higher energy costs, and constrained and high cost of funding (tighter financial conditions).
He said, “Inflation risks remain tilted to the upside, driven largely by energy and commodity price pressures, prompting some of the major central 2 banks to increase policy interest rates, while market expectations for rate cuts have diminished,” said .
Central Bank officials revealed that real gross domestic product (GDP) contracted by 0.7 percent in 2025, following a contraction of 2.8 percent in 2024.
The slower pace of contraction was mainly attributable to a smaller decline in diamond mining, alongside continued, albeit slower, growth in the non-mining sector.
The International Monetary Fund’s April 2026 World Economic Outlook report, global economic growth is expected to remain subdued at 3.1 percent in 2026, down from 3.4 percent in 2025.
Modest growth is expected to be underpinned by resilient consumption and investment, although uncertainty surrounding trade, industrial and fiscal policies continue to weaken growth prospects.
Domestically, the Ministry of Finance projects a recovery in economic activity, with growth expected to reach 3.1 percent in 2026, on account of stronger performance in non-mining sectors, supported by the implementation of economic diversification 3 initiatives under National Development Plan 12 and the Botswana Economic Transformation Programme (BETP).
Moseki said, “It is important however, to highlight that any delay in the implementation of the BETP could undermine recovery.”
He said, “Furthermore, the growth outlook remains subject to downside risks, including livestock disease outbreaks, geopolitical tensions, climate-related shocks and shifting trade patterns.”
Headline inflation increased slightly from 10.3 percent in April 2026 to 10.7 percent in May 2026, remaining above the medium-term objective range of 3 – 6 percent.
The increase in inflation between April and May 2026 was mainly due to the base effect associated with the decrease in water tariffs for low-consumption households in May 2025, which had lowered inflation by 0.23 percentage points at the time.
The MPC forecasts inflation to remain above the upper bound of the 3 – 6 percent objective range in the near term, mainly due to supply-side factors that include the persistence of high international oil prices and impact on domestic fuel prices and associated cost-push pressures.
Inflation is projected to average 9 percent in 2026, before easing to 5.5 percent in 2027.
“Overall, there is a greater risk of inflation being higher than currently projected mainly due to potential second-round effects stemming from the increase in domestic fuel prices and possible increase in administered prices, in particular, electricity tariffs and public transport fares,” said Moseki.
He said, “Additionally, the outbreak of Foot and Mouth Disease in Botswana in January 2026 and the resultant disease management 4 measures in terms of livestock movement and slaughter restrictions in Botswana may lead to higher food inflation in the short term.”
Externally, the increases in prices for oil, gas, fertilisers and industrial inputs due to the war in the Middle East will continue to be inflationary should the ongoing peace negotiations breakdown and the conflict persist. The possibility of tariff increases globally is also expected to heighten inflation risks. Inflation could, however, be lower than projected if domestic and global economic activity remains subdued, fiscal space remains tight, or if international commodity prices fall.
There is a strong need for continued vigilance and management of inflation expectations to ensure that inflation reverts to the medium-term objective range.
Domestic liquidity has improved from the last quarter of 2025 due to increased government funding and related spending; higher diamond receipts; and policy and monetary operations adjustment.
This has resulted in moderation in funding costs and enhanced prospects for better monetary policy transmission; especially following the recalibration of the MoPR in October 2025 and April 2026.
