Of rising prime lending rates, the private sector and FDI :: Mmegi Online

In May 2025, the average prime lending rate, rose sharply from 6.01% in April to 6.72% in May, a 12% increase in just one month. This upward adjustment has drawn considerable attention, given its divergence from the Bank of Botswana’s accommodative monetary policy stance, which has maintained the Monetary Policy Rate (MoPR) at 1.9% over the period. This article explores the underlying drivers of the surge in the prime lending rate and its implications for households, the domestic private sector, and foreign direct investment (FDI).

On April 1, 2023, the Bank of Botswana liberalised the Prime Lending Rate (PLR), giving commercial banks the freedom to set their own rates. The intention was to enhance competition, improve pricing for borrowers and ensure that lending rates reflect market conditions rather than a uniform central directive.

The PLR is the benchmark rate banks charge their most creditworthy clients and it transmits through the pricing of personal loans, mortgages and business credit. Recently, commercial banks in Botswana have adjusted their PLRs upward, although the magnitude of increases has varied across banks.

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