GABORONE, June 17 (Xinhua) -- Bank of Botswana (BoB)'s Monetary Policy Committee (MPC) decided to increase the monetary policy rate, commonly known as the repo rate, by 50 basis points from 1.65 percent to 2.15 percent.

Moses Pelaelo, the governor of BoB, made the announcement Thursday when addressing journalists following an MPC meeting held in Gaborone, the capital of Botswana.

Pelaelo said inflation rose from 9.6 percent in April to 11.9 percent in May, remaining way above the medium-term objective range of 3 to 6 percent set by the southern African country's reserve bank.

He said the latest increase in inflation mainly reflects the upward adjustment in domestic fuel prices effected on May 13, 2022.

According to Pelaelo, the MPC projects that inflation will, in the short term, remain above the objective range but trend downward from the fourth quarter of 2022 and fall within the medium-term objective range from the third quarter of 2023.

Mothusi Mbiganyi, an independent economist based in Gaborone, said consumers, who tightened their belts due to the devastating financial impact of COVID-19 coupled with escalating fuel and food prices, now must reduce their spending even further.

Mbiganyi said the repo rate is the level at which commercial banks borrow money from the central bank and in turn determines interest rates for consumers.

In economic terms, he said a hike in the repo rate increases the cost of borrowing in the economy for domestic consumers and businesses and in turn reduces purchasing power and investment capacity, thereby the move should help reduce inflation in theory.

"However, the repo rate increase pours more misery on consumers in Botswana, most of whom rely, heavily on debt to survive," said Mbiganyi.

According to the World Economic Outlook for April 2022, the growth estimates for Botswana for 2022 and 2023 are 4.3 percent and 4.2 percent, respectively. Enditem

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