Brian Benza
20 November 2009
Analysts expect the interest rate to remain unchanged for the time being as inflation is expected not to move significantly in the coming months.
Inflation, which last week fell by 0.1 percentage points to 6.9 percent, has reduced dramatically from the highs of early this year, prompting the Bank of Botswana (BoB) to cut the bank rate by a cumulative 450 basis points since December last year.
Apart from the low inflation expectations, analysts also say that the need to rejuvenate economic growth will also drive the central bank's Monetary Policy Committee to keep the bank rates low as the economy tries to find its way back to its feet after the recession.
"We expect the Bank of Botswana to leave the Bank Rate unchanged for now as inflationary pressures are expected to remain weaker and in single digits in the short to mid-term.
"This will go a long way in enabling economic agents to access the much-needed funds at a lower cost and will help stimulate economic growth," says a monthly bulletin from stockbrokers, Motswedi Securities.
Meanwhile, BoB reports that total commercial bank deposits have fallen by five percent since the beginning of the year from P37.2 billion in December 2008 to P35.4 billion in August 2009, reflecting the effects the slow down in the economy has had on savings.
The central government experienced the largest decreases, tumbling by 71 percent from P529.7 million in December 2008 to P156.1 million in August this year.
This is a reflection of reduced earnings from mainly the minerals sector due to the recession.
The local government was next in line, dropping by 30 percent to P514.0 million, followed by the household sector -14 percent, business non-resident -5.5 percent and business resident -1.5 percent. The parastatal sector, however, had an increase of 7.0 percent.
Despite the decline in commercial bank deposits, statistics from the Bank also indicates that total advances by commercial banks has risen by 5.2 percent from P17.2 billion in December 2008 to P18.0 billion in August 2009.
During the same period in 2008, total advances grew by 16.9 percent.
Local government had the highest advances growing by 127 percent to P19.7 million, followed by parastatals 75 percent and the other sectors, which comprises real estate, community services and tourism and hotel sectors had a 15 percent increase in advances since the beginning of the year.
Advances to the household sector grew by 12.1 percent to P10.9 billion in August this year from P9.8 billion in December 2008. Since the beginning of the year, savings from the household sector fell by 13.7 percent, while advances rose by 12.1 percent.
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