Inflation tanks below target amid rising food, fuel costs
Lewanika Timothy | Tuesday September 23, 2025 13:32
Botswana’s annual inflation rate rose modestly to 1.4 percent in August 2025, up from 1.1 percent in July, yet it continues to hover well below the Bank of Botswana’s (BoB) medium-term target range.
According to researchers in the Bank’s latest Monetary Policy Report, the persistently low inflation reflects subdued domestic demand amid a slow economic recovery and weak price pressures in key sectors such as transport and housing.
The increase in August was largely driven by Food & Non-Alcoholic Beverages and Miscellaneous Goods & Services, which contributed 0.7 and 0.8 percentage points, respectively, to the headline inflation rate. Notable food price rises included fish (3.3 percent), sugar, jam, and coffee (2.3 percent), fruits (1.5 percent), and bread & cereals (1.1 percent), highlighting rising costs for essential household items even as overall inflation remains low.
Prices for housing, water, electricity, gas, and other fuels, and transport, exerted downward pressure, reflecting earlier tariff reductions and the fading impact of last year’s fuel price spike.
Bank of Botswana researchers noted that headline inflation has consistently remained below the lower bound of the central bank’s target for several months.
“Headline inflation decreased from two percent in June to 1.1 percent in July 2025, remaining below the medium-term objective range,” the report states.
For consumers, this low inflation environment provides stability in many living costs, but rising food prices are putting pressure on household budgets. For producers and retailers, persistently low overall inflation can limit their ability to pass on higher costs to consumers, squeezing profit margins, particularly in the food sector.
Looking ahead, inflation is expected to rise in the coming months. Last week, the Botswana Energy Regulatory Authority (BERA) increased fuel prices, which will feed into transport and production costs and is likely to push headline inflation higher. Globally, inflation pressures are moderating, with falling oil prices and stable commodity costs, though seasonal supply issues continue to support higher food prices.
BoB researchers caution that while headline inflation remains low, rising food and fuel costs, combined with exchange rate adjustments and market price setting, could push inflation closer to or above the target range in 2026.