The country’s apex bank last week adjusted the MoPR from 1.9 percent to 3.5 percent, in what it described as a “recalibration” meant to strengthen monetary policy and preserve the country’s foreign exchange reserves. “This policy decision is intended to reinforce policy transmission, particularly in relation to monetary operations tools and distribution of market liquidity,” the Bank said, adding the step also complements the July 2025 adjustment of exchange‐rate parameters, which aimed to safeguard foreign‐exchange reserves. The move marks the first policy rate change in over a year, after the BoB kept the MoPR steady since August 2024. Also, the decision comes at a time when commercial banks have been tightening lending conditions and steadily increasing prime lending rates (PLRs), squeezing private sector credit growth and household borrowing. For ordinary Batswana, the MoPR is the benchmark rate that guides the cost of borrowing across the economy, from mortgage and car loans to small business financing. When it goes up, banks typically follow by raising their lending rates, which can slow borrowing and spending.
However, by freezing PLRs this time, BoB aims to prevent an immediate shock to borrowers while still tightening the broader money supply to protect reserves. The directive to the banks effectively puts a lid on borrowing costs for households and businesses already feeling the strain of tight liquidity conditions. BoB Governor, Cornelius Dekop, had earlier warned that the upward drift in commercial bank lending rates, despite an accommodative stance by the central bank, risked undermining policy effectiveness. “This policy decision is intended to reinforce policy transmission, particularly in relation to monetary operations tools and the distribution of market liquidity,” the Bank said in a statement. The rate hike follows a period of acute liquidity shortages in the domestic money market, which saw overnight interbank rates surge and banks’ demand for short-term liquidity injections increase sharply. The Bank has responded with targeted liquidity support measures, including longer-term repo operations and a temporary pause in PLR adjustments, to stabilise the system. According to the Monetary Policy Committee (MPC), these interventions have improved market functioning, with interbank foreign exchange trading activity rising from an average of P2.4 billion to P3 billion per month.
