Presenting the mid-term review of the 2008 Monetary Policy Statement (MPS) in Gaborone last week, BoB Governor Linah Mohohlo said the crawling band exchange rate regime, which has been in operation for the past three years, would not result in a significant adjustment to top the nominal exchange rate this year.
This comes against the backdrop of criticism by some analysts that the prevailing exchange rate mechanism is inflationary as it weakens the Pula against the South African Rand from whose country Botswana sources most of its imports. "The rate of crawl of the exchange rate, which is based on the differential between the Bank's inflation objective and forecast inflation for trading partner countries, is not expected to result in a substantial nominal exchange rate adjustment in 2008, particularly against the South African Rand," Mohohlo said. "The rate of crawl should, therefore, not add significantly to inflationary pressures, especially in an environment of a relatively restrictive monetary policy."
