GABORONE, April 30 (Xinhua) -- Botswana's central bank has cut its benchmark interest rate by 50 basis points from 4.75 percent to 4.25 percent.
The authorities at Bank of Botswana (BoB) made the announcement following a monetary policy meeting on Thursday in the capital Gaborone.
"The current state of the economy and the outlook for both domestic and external economic activity provide scope for easing monetary policy to support domestic economic activity," said Moses Pelaelo, the BoB governor.
He further said the bank also decided to reduce the primary reserve requirement (PRR) from 5 percent to 2.5 percent.
According to Pelaelo, the reductions are expected to inject liquidity of approximately 1.6 billion Pula (about 130 million U.S. dollars) into the banking system, which should allow commercial banks to be unconstrained in performing the necessary financial intermediation to support economic activity.
Latest projections by both the Ministry of Finance and Economic Development (MFED) and the International Monetary Fund (IMF) suggest a sharp deterioration in economic growth for Botswana in 2020.
The IMF forecast GDP to fall by 5.4 percent this year, before rebounding to 6.8 percent in 2021, while the MFED estimates that the economy will contract by 13.1 percent, and rebound to a 3.9 percent growth in 2021.
"Broadly, the contraction in GDP reflects the substantial curtailment of economic activity due to the necessary global and domestic measures implemented to contain the spread of COVID-19 and safeguard human life," the governor said.
Meanwhile the country's inflation was unchanged for the fourth consecutive month at 2.2 percent in March 2020, remaining below the lower bound of the Bank's desired medium-term objective range of three to six percent. Enditem
