Botswana keeps benchmark rate steady 1.9%

The economy of Botswana continues to face challenges amidst global economic uncertainty sparked by US tariffs and a decline in the mining sector. The central bank of Botswana recently held its main lending rate steady at 1.9%, citing balanced risks to the inflation outlook. Kealeboga Mogodi, Head of Business & Commercial Sales at Stanbic Bank Botswana, joined CNBC Africa to discuss the economic situation in the country. The decision to maintain the interest rate was in line with expectations, considering the economic outlook that anticipates operating below full capacity in the short to medium term. The mining sector contraction and subdued growth in the non-mining sector, along with potentially declining global oil prices, are all factors contributing to the economic challenges faced by Botswana. The global trade policies and uncertainties surrounding them are also expected to impact Botswana's exports to the United States, adding to the economic headwinds. Despite the current economic climate, expectations for the second half of 2025 include a possible lowering of the monetary policy in response to these risks. The uncertainties in the global economy, particularly the ongoing trade war, have significantly altered the economic outlook for Botswana. The recent GDP numbers reflect a decline, with a decrease in real GDP growth compared to the previous period. The underperformance of the diamond sector due to subdued demand and declining prices has further exacerbated the economic challenges. To address these issues, there is a pressing need to diversify the economy away from relying heavily on the diamond sector. The emphasis should be on building a stronger base within the non-mining sectors such as financial services, agriculture, and tourism. The government's focus on investment in these sectors will be crucial for economic diversification and growth. Investments in renewable energy projects and infrastructure development are also highlighted as key focus areas that can anchor the economy moving forward. The administration led by President Dumaboko is signaling a shift towards directing investments into non-mining sectors to combat the current fiscal pressures and liquidity issues. There are plans to invest in renewable energy, agriculture, and healthcare sectors to drive economic growth. Despite the cautious business sentiment due to global uncertainties and the ongoing trade dynamics, there are silver linings in the form of predictably low inflation that allows companies to plan better. The government's emphasis on public administration spending and infrastructure projects is expected to boost business confidence, particularly among SMEs and local corporations. Market participants are closely monitoring the trade dynamics between the US and Botswana during the 90-day tariff pause. The engagement between the government and US officials will have a significant impact on Botswana's exports, especially in the diamond sector. The resolution of global trade tensions is crucial for restoring stability and fostering favorable trading conditions for all parties involved. Overall, Botswana's economy is navigating through turbulent waters, with a focus on diversification and strategic investments to mitigate the current challenges and drive sustainable growth.