Botswana has become the first African central bank to raise interest rates following the global energy shock triggered by the U.S.-Israel\u2013Iran conflict, amid intensifying inflation pressures.<\/p>\n
\n Botswana<\/a> has become the first African central bank to raise interest rates following the global energy shock triggered by the U.S.-Israel\u2013Iran conflict, amid intensifying inflation pressures.
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\n The central bank\u2019s monetary policy committee increased the benchmark rate by 200 basis points to 5.5% from 3.5%, Governor Lesego Moseki said during a briefing in the capital, Gaborone.
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\n Officials expect inflation to rise sharply in the near term, breaching the upper limit of the bank\u2019s 3% to 6% target range in the second quarter. Inflation is projected to average 8.7% in 2026 before easing to 5.6% in 2027, driven largely by higher fuel prices, transport costs, and medical aid premiums, Bloomberg reported.
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\n The rate hike is also aimed at strengthening monetary policy transmission, though the central bank warned that inflation risks remain tilted to the upside due to second-round effects, including potential increases in electricity tariffs and other administered prices.
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\n Global disruption hits Africa hard
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\n Since the conflict began in February, global supply chains have been heavily disrupted, largely due to the blockage of the Strait of Hormuz, a critical trade route for energy and commodities. Africa<\/a> has been among the hardest hit<\/a> by these disruptions.
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\n Economists say Botswana is particularly exposed to rising fuel costs, as transport carries a relatively high weight in its consumer price index. The central bank expects inflation to surge to about 8.9% this month, up from 4.2% in March\u2014its highest level in three years.
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\n The tightening comes at a difficult time for the economy. Botswana is already facing a downturn in its diamond sector, which accounts for roughly 80% of exports and about a third of government revenue, adding pressure to growth and public finances.
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\n Higher borrowing costs are likely to persist as fiscal pressures remain elevated, potentially weighing on consumer spending and credit demand, analysts say.
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