Bank of Botswana’s Monetary Policy Committee (MPC) has on Thursday slashed the bank rate by 50 basis points.
The rate has been reduced from 4.75 percent to 4.25 percent, a historic low level as he bank reacts to the economic hardships caused by the Covid-19 pandemic.
When announcing the decision on Thursday afternoon, BoB Governor, Moses Pelaelo noted the COVID-19 pandemic and consequent containment measures have severely curtailed economic activity globally and domestically as production, supply chains, project implementation and provision of goods and services are halted.
“Similarly, consumption and spending are disrupted, hence domestic demand pressures and foreign prices remain subdued,” noted the central bank governor.
According to Pelaelo, the global economy is projected to contract by 3 percent in 2020 which is worse than the contraction experienced during the 2008/09 global financial crisis.
Economic damage from the COVID-19 crisis is also projected to surpass that of the Great Depression of the 1930s.
“Nevertheless, economic activity is expected to rebound in 2021, with global growth estimated at 5.8 percent, anchored by unprecedented policy and resource support by individual countries and multilateral institutions,” said Pelaelo.
Pelaelo said the current state of the economy and the outlook for both domestic and external economic activity provides scope for easing monetary policy to support domestic economic activity.
As a result, he said the MPC decided to cut the bank rate by 50 basis points as way to boost economic activity.