BoB to revise inflation outlook after pula adjustment
Mbongeni Mguni | Wednesday July 30, 2025 06:10
Firms around the country have increased their prices following the downward revision of the pula and an increase in the costs commercial banks pay to access foreign currency from the central bank.
Both the BoB and the Competition and Consumer Authority have criticised the price hikes, describing them as 'disingenuous' and 'opportunistic'. The central bank has said banks, in particular, are adding unreasonable mark-ups on their rates for foreign currency.
BoB director of research and financial stability, Innocent Molalapata, said assessments of the impact of the price hikes were ongoing to inform the August meeting of the Monetary Policy Committee.
“Given that we have been seeing recently business adjusting prices from the exchange rate adjustment, this is likely to bring a different picture to our projection of inflation,” he said at a briefing on Friday. “When you have a situation where business immediately increase their prices, even on stock bought before the adjustment, is something we did not anticipate and we are still gathering information on.”
The Monetary Policy Committee makes interest rate decisions based on inflation forecasts as well as inflation expectations amongst businesses. The connection between the BoB’s interest rate decisions and the interest rates being charged by banks has, however, loosened this year, as the banks have increased their rates due to a shortage of liquidity in the financial sector.
The bank would monitor and make adjustments “necessary to ensure a return to the inflation objective,” a range set between three and six percent, deputy governor Kealeboga Masalila said.
“In reality, the transmission and actions were not as expected for various reasons, therefore, we might need to regroup our focus,” he told BusinessMonitor. “But we are confident that in the short-term with respect to inflation, we will monitor and make adjustments necessary to ensure that we return to the inflation objective, because we will not allow inflation to run ahead of the objective.”
On July 11, the Finance ministry announced that it would allow the pula to weaken at a faster rate this year, whilst also increasing the costs commercial banks pay to access foreign currency from the central bank, in a move aimed at preserving reserves amidst a sharp downturn in diamond sales.
The country has seen its foreign exchange reserves slide from to P47.2 billion in May from P65.3 billion a year earlier, due to a prolonged slump in the precious stones.