Market News

GABORONE, April 30 (Reuters) – Botswana’s central bank increased its monetary policy rate by 200 basis points on Thursday, saying inflation was expected to breach its target band mainly due to fuel price hikes linked to the Iran war.

The Bank of Botswana raised the rate to 5.5% from 3.5%.

Inflation is projected to breach the bank’s preferred 3%-6% target band in the second quarter of this year and average 8.7% in 2026 before easing to 5.6% in 2027, its governor told a press conference.Governor Lesego Moseki said the bank had raised its inflation forecasts following increases in domestic fuel prices, public transport fares and medical aid premiums. He said there was a need to “recalibrate and reinforce policy transmission and signalling”.

The central bank last sharply increased its policy rate in October 2025, when it delivered a 160-basis-point hike to try to narrow the gap with market lending rates, which had been driven higher by a liquidity squeeze caused by an economic slump.

The southern African country’s economy has been hit hard by a prolonged downturn in the global diamond market, with successive gross domestic product contractions in the past two years.

Botswana’s government had projected an economic rebound before the Iran war started, though debt is expected to rise because of another large budget deficit.

Annual inflation stood at 4.2% year-on-year in March, up from 4.0% in February.