Botswana’s economy expected to operate below full capacity
Larona Makhaiza | Wednesday December 10, 2025 10:03
This forecast guided the central bank’s Monetary Policy Committee (MPC) to maintain the Monetary Policy Rate at 3.5 percent in its meeting held here last week.
Giving an update of the MPC’s deliberations, Moseki said that although inflation is expected to temporarily breach the upper bound of the three to six percent objective range, it is expected to be within the objective range in the medium term.
“This outlook supports maintaining a broadly accommodative monetary policy stance that would support economic activity, especially implementation of economic transformation initiatives,” he said.
He further said that the MPC assessment is that the policy adjustments made thus far and communicated have helped ease liquidity conditions and are positive for the foreign exchange markets.
In maintaining the Monetary Policy Rate, Moseki said that the existing directive instructing commercial banks not to increase their prime lending rates remains in place.
“The bank will continue to monitor developments closely and implement appropriate policy actions consistent with its mandate to maintain price stability and safeguard financial stability,” he continued.
Earlier on, the new BoB Governor stated that the MPC was meeting at a time whilst the global economy continues to experience shifting trade patterns and heightened geopolitical tensions.
Despite these challenges, he highlighted that the global economy has demonstrated stronger-than-anticipated resilience in 2025.
According to Moseki, domestically, increased uncertainty and continued weakness in the diamond market have put pressure on Botswana’s fiscal and external buffers.
Therefore, he elaborated that going into 2026, it is essential that growth-enhancing initiatives and economic diversification efforts, as indicated in the Botswana Economic Transformation Programme and the National Development Plan 12, be implemented with greater rigour and agency to support a sustainable recovery.
Related to this, Moseki stated that leveraging the country’s institutional strength and sound macroeconomic policy frameworks, as reflected in recent policy adjustments to address liquidity conditions and preserve foreign exchange reserves, provides an opportunity to attract investment and has the potential to drive economic transformation.
Moseki said that, as reported at the MPC meeting of October 2025, Botswana’s real Gross Domestic Product contracted by three percent in the 12 months to June 2025, a sharper decline compared to the 0.6 percent contraction in the year ending June 2024.
“The weak performance was mainly due to the continued contraction in mining output and generally subdued non-mining sector activity,” he continued.
According to the October 2025 World Economic Outlook, global economic growth was 3.3 percent in 2024, and it is forecast to remain subdued at 3.2 percent and 3.1 percent in 2025 and 2026, respectively.
Additionally, the governor said that the main influences on global output growth include milder than expected tariff impacts, quicker than anticipated private sector adjustment through frontloading of imports and supply chain diversification, lower effective US tariff rates, improved global financial conditions, and fiscal expansion in some major economies.
“For Botswana, the Minister of Finance projects economic contraction of 0.5 percent in 2025 from a previous estimate of a contraction of 0.4 percent, mainly due to the continued weak performance of the diamond industry, subdued global growth, and the potential adverse effects of US tariffs,” he said.