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Botswana's central bank left its Bank Rate steady at 5.0 percent, saying the state of the economy and the outlook for domestic and external activity suggests the current monetary policy stance is consistent with inflation within its objective range of 3-6 percent.


The Bank of Botswana (BB), which has maintained its rate since cutting it to the current level in October 2017, said subdued domestic demand pressures and the modest increase in foreign prices contributed to the positive outlook for inflation, with upside risk from an improving global economy and the potential rise in commodity price, unexpected increases in administered prices and government levies or taxes.

Downside risks emanate from modest demand pressure and a restrained rise in salaries.


Botswana's inflation rate eased to 2.8 percent in March from 3.2 percent in February, with the exchange rate of the pula softening in the last month after appreciating since January 2016.


The pula was trading at 9.8 to the U.S. dollar today, up 0.7 percent this year and 9 percent higher than at the start of 2017.


Last year Botswana's economy grew by 2.4 percent, down from 4.3 percent in 2016, as mining output contracted by 11.2 percent, faster than a 3.5 precent decline in 2016.


This year BB expects the economy to benefit from growth in services and a recovery in mining activity, in line with the positive global economic prospects. In addition, stability in water and electricity supply, accommodative monetary conditions and higher government spending should support economic activity.


"Overall, the economy is expected to operate close to, but below full capacity in the medium term," the central bank said.

 

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