Botswana’s central bank has cut its benchmark lending rate by 50bps to 9% to spur economic growth, it said in a statement on its website. The bank’s Monetary Policy Committed (MPC) noted that inflation will remain outside its target range of 3%-6% in the short term, but the outlook remains positive and, given recent indications of slower economic growth, a more accommodative policy stance is consistent with achieving the inflation objective in the medium term.
Botswana’s annual inflation rose to 7.6% in March from 7.5% in February, but was below its March 2012 level of 8%. The central bank said that weak domestic demand and expected low external inflationary pressures would contribute to a downward trend in inflation, which should converge to the medium-term target range in the second half of 2013. Potential risks to the outlook include unanticipated large increase in administered prices and government levies, as well as international food and oil prices increasing beyond current forecasts.
Botswana’s diamond-dependent economy grew 3.7% last year with the non-mining sector’s growth slowing to 5.8% from 7.8% in 2011 and the mining sector contracting by 8.1%. The central bank expects non-mining output expansion to remain below potential in the medium term and to exert minimal inflationary pressure.
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