Botswana Hikes Key Rate for 1st Time since 2022

2025-10-30 11:20 By Luisa Carvalho 1 min. read

The Central Bank of Botswana raised its benchmark interest rate by 160 bps to 3.5% during its meeting held on October 30, 2025.

This marked the first rate hike since June 2022, pushing borrowing costs to the highest since March 2022, aiming to enhance monetary transmission by reducing the gap between the policy rate and commercial bank lending rates.

At the same time, policymakers balanced stronger inflationary pressures against a struggling economy.

The inflation rate in Botswana accelerated for the second month to 3.7% in September 2025, the highest since August 2024.

Inflation is expected to temporarily exceed the target range, with risks tilted to the upside.

Meanwhile, real GDP contracted by 5.3% year-on-year in Q2, the most since 2020, extending the downturn into a 6th straight quarter, mainly due to the continuing weak diamond market.

The economy is expected to continue to operate below full capacity in the short-to-medium term, though improving marginally into the medium term.



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Botswana Hikes Key Rate for 1st Time since 2022
The Central Bank of Botswana raised its benchmark interest rate by 160 bps to 3.5% during its meeting held on October 30, 2025. This marked the first rate hike since June 2022, pushing borrowing costs to the highest since March 2022, aiming to enhance monetary transmission by reducing the gap between the policy rate and commercial bank lending rates. At the same time, policymakers balanced stronger inflationary pressures against a struggling economy. The inflation rate in Botswana accelerated for the second month to 3.7% in September 2025, the highest since August 2024. Inflation is expected to temporarily exceed the target range, with risks tilted to the upside. Meanwhile, real GDP contracted by 5.3% year-on-year in Q2, the most since 2020, extending the downturn into a 6th straight quarter, mainly due to the continuing weak diamond market. The economy is expected to continue to operate below full capacity in the short-to-medium term, though improving marginally into the medium term.
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