Inflation exceeds target

Prices rose 0,7 percent in the month after food and health costs gained. Botswana’s central bank raised its benchmark lending rate by half a percentage point to 15 percent on February 17 to subdue inflation after the government devalued the currency by 12 percent last year, boosting import costs. The Bank of Botswana expected the inflation rate to “stabilise” at about 16 percent in the first half of this year, it had said on February 28. “Domestic inflation is projected to remain relatively high in 2006,” central bank governor Linah Mohohlo said then. “The challenge of monetary policy in 2006 is to ensure it does not rise beyond the expected increase arising from the devaluation,” she said. Botswana’s inflation has exceeded the central bank’s target range of 4 percent to 7 percent for nine months running. The bank is aiming to bring the inflation rate down to a range of 3 percent to 6 percent by 2008. Inflation surged after the government devalued the pula against a basket of currencies on May 30 last year, boosting import costs. It shot to its highest level in at least three years in January after the government reintroduced fees at secondary schools. Botswana is struggling to boost nonmining exports to reduce its reliance on diamond earnings. The government expected economic growth to slow to about 6 percent in the fiscal year ending March 31, from 8,3 percent the previous year, Finance Minister Baledzi Gaolathe said on February 6. The country’s diamond industry is run by De Beers, the world’s biggest diamond company, through a joint venture with the government. ‘

March 2006
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