Bank of Botswana Signals Diamond Recovery
February 25, 25
(IDEX Online) - Botswana's central bank kept its key interest rate at 1.90 per cent last Thursday (20 February), signaling its hope that global diamond demand - which drives its economy - will rebound.
Inflation increased to 2.50 per cent in January, its steepest monthly hike since last August, but the government says preferred inflation range over the medium term is 3 per cent to 6 per cent.
The central bank's decision to maintain the interest rate reflects its assessment that the economy is operating below capacity and is not generating significant demand-driven inflationary pressures.
Botswana's government is forecasting a recovery in the diamond market later this year, and a consequent expansion of the country's economy.
It shrank by 3.1 per cent in 2024, but according to vice president and finance minister Ndaba Gaolathe it is now expected to grow 3.3 per cent in 2025.
Diamonds account for around 80 per cent of Botswana's export earnings and a third of total budget revenues.
De Beers and the Botswana government have finally reached agreement on the long-term mining and rough sales deals, although their joint venture, Debswana, reported sales for the first three quarters of 2024 were down by 52 per cent.