The central bank cut its benchmark interest rate for the first time since August as inflationary pressures eased. “Prospects for the level of inflation being sustained within the 3 to 6% objective range during 2010 remain good,” according to the Gaborone-based Bank of Botswana. “Accordingly, the bank has reduced the bank rate by 1% to 10% with immediate effect.”
Botswana’s inflation rate dropped to 5% last month from 6.9% in October, the Central Statistics Office said on December 16th 2009. Further price increases should be contained by excess industrial capacity, lower commodity prices and weak labor market conditions, the central bank said.
Botswana is the world’s largest diamond producer. Demand for the gems has slumped amid the global economic recession, and the International Monetary Fund expects the southern African nation’s economy to contract 10.3% this year.
“There is an improvement in economic prospects as the world economy recovers from the recent deep recession,” the central bank said. “The sustainability of the global economic recovery depends on normalization of the global financial system, as well as a smooth and coordinated exit from the policy stimulus packages that the advanced countries undertook to support economic activity.”
The central bank last cut its benchmark interest rate on Aug. 25, lowering it by half a percentage point.
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