BoB upbeat on economic recovery

SHARE   |   Thursday, 25 June 2020   |   By Bakang Tiro
Governor of Bank of Botswana (BoB) Moses Pelaelo Governor of Bank of Botswana (BoB) Moses Pelaelo

The central bank, Bank of Botswana is optimistic on the domestic economic recovery in the face of the principal contests resulting from the COVID-19 pandemic ravage that gripped the world.

However, experts have reiterated that there is a need for comprehensive economic stimulus package to bailout the economy that has been curtailed by COVID-19 for future sustainability.

President of Business Botswana (BB) Gobusamang Keebine insisted that there is a positive outlook for the economy to be revitalized due to positive environment facilitated by BoB.

“The combination of what BoB is pushing for by keeping or maintaining bank rate at lower level and the loan guarantee scheme plan that is on the cards instituted by government will be very crucial in rescustiating the economy as businesses can have a relief to back alive,” Keebine said.

In addition, Keebine has said the private sector has been hardly hit by the effects of lockdown especially the small and medium enterprises hinting that comprehensive bailout plan is crucial.

He buttressed that Business Botswana will be monitoring the efficiency of the loan guarantee scheme recovery mechanism if it is effective and where it needs adjustments they will advise.

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Governor of Bank of Botswana (BoB) Moses Pelalelo has said the Monetary Policy Committee (MPC) of the bank decided to leave bank rate unchanged at 4.25% so as to stimulate activity.

He noted that one of the ways that central bank is anticipates smooth economic recovery is through offering more accommodative monetary policies saying the bank rate is conducive.

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“The central bank as an economic advisor to the government we have to ensure that there is a prospective economic recovery phase from the COVID-19 pandemic. What informed the MPC to leave the bank rate unchanged was to facilitate more activity at lower borrowing,” he said.

According to Pelaelo, the bank will also offer advisory role to Ministry of Finance and Economic Development if there is any potential policies that will be considered if need be post COVID-19.

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BoB further says COVID-19 pandemic and consequent containment measures have severely curtailed the economic activity globally and domestically as production, supply chains, project implementation and provision of good s and services constrained hence sluggish fiscal growth.

Similarly, consumption and spending are disrupted, hence domestic demand pressures and foreign prices remain subdued. Consequently, overall risks to the inflation outlook are skewed to the downside. Inflation may rise above current forecasts if international commodity prices increase beyond current projections and in the event of upward price pressures occasioned by supply constraints due to cruel travel restrictions and lockdowns,” Governor Pelaelo buttressed.

Pula stability

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The Director of Research and Financial Stability at BoB, Dr Alex Kganetsano says the local currency pula has been stable amidst COVID-19 heat indicating that it is a promising bliss.

According to him, the pula stood the test of volatility as most of the currencies across the continent were depreciating due to subdued economic evidenced by South African Rand.

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“The Pula has quite down well so far as we weigh it as compared to the South African Rand currency. The fact is that any volatility that suppress the rand directly affects the pula but it remained stable by weighing looking at basket currency mechanism,” Dr Kganetsano stressed.

He insisted that a more accommodative monetary stance due to reduced bank rate would be vital in driving the pula dominance as domestic demand is high thus sparking more spending.

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 The South African rand hit recently hit a record low against the US dollar after the Moody’s removed investment-grade credit rating for Africa’s most built-up economy citing the sluggish growth due to the COVID-19 pandemic and Moody kept South Africa debt on negative outlook.