The Bank of Botswana has reduced the monetary policy rate (MPR) by 25 basis points to 1.9%, from 2.15%, to boost the country's economic growth which has performed below expectations in 2024. It is the third consecutive rate cut by the bank.
Although Botswana's July inflation of 3.5% is within the bank's 3-6% range and is expected to average 3% in 2024, economic growth has not moved much. In July, the IMF revised down Botswana's economic growth projections from 3.6% to 1% in 2024. Low diamond sales as well as weak performance of non-mining sectors have largely contributed to the slow growth.
“We hope that this decision will assist to stimulate the economy,” Bank of Botswana governor Cornelius Dekop said at Thursday’s MPC meeting.
According to a production report by Anglo American which owns De Beers, Botswana's diamond production was down 6% in Q2 2024. While 5 million carats were mined in Q1 2024, this figure declined to 4.7 million in Q2 2024.
The decline is even more prominent when looking at production over the past year, with Q2 2024 seeing 19% less output than Q2 2023. H1 2024 also saw 24% less production compared to H1 2023. Jwaneng Mine on its own saw a sharp 25% and 36% decline in quarterly and yearly production respectively.
In terms of economic growth, in the medium term, growth is expected to converge towards 4%, as diamond mining and sales recovers.