The Monetary Policy Committee of the central bank of Botswana announced its decision on Thursday to hold the country’s bank rate at 3.75%.

The Bank of Botswana (BoB) made the decision despite a rise in inflation from 8.7% in December last year to 10.6% in January.

“The MPC decided to continue with the accommodative monetary policy stance and maintain the bank rate at 3.75%, to continue to support the nascent economic recovery,” according to the central bank governor Moses Pelaelo, emphasising that the bank is ready to respond as conditions advance.

The Bank of Botswana forecasts that the country’s economy will operate under full capacity in the short to medium-term, as such not generating inflationary pressures driven by demand moving forward.

“The projected increase in inflation in the short term is primarily due to transitory supply-side factors that, except for second-round effects and entrenched expectations, do not normally attract monetary policy response,” Pelaelo went on to say.

The BoB governor said the Monetary Policy Committee supports the economic transformation reforms and macroeconomic policies currently being introduced.

These policies and reforms include further improvements to the business environment, accommodative monetary conditions, enhancements to the supply of water and electricity throughout the country and government interventions against Covid, such as efficient vaccine rollout programs.

“In addition, the successful implementation of the Economic Recovery and Transformation Plan (ERTP) should help anchor the growth of exports and preserve a sufficient buffer of foreign exchange reserves,” the Bank of Botswana added.