Monetary policy entails the formulation and implementation of policies aimed at influencing interest rates and/or growth of the money supply to affect economic performance. This is particularly in relation to inflation; although monetary policy also has an impact on output growth, inflation, employment and the balance of payments. Implementation is typically entrusted to central banks, as is the case in Botswana where, under the Bank of Botswana (Amendment) Act, 2022 the Bank adopts the ranked dual mandate. Section 4(2) of the Act incorporates a financial stability mandate in addition to primary mandate of maintaining price stability. Under the new legislation, the primary objective of the Bank is to achieve and maintain domestic price stability. Insofar as it is not inconsistent with this primary objective, the Bank is also expected to use its available policy instruments in support of orderly, balanced and sustained economic development in Botswana, as well as the attainment of broader national development goals.
Monetary policy in Botswana has evolved over time with an increasing focus on the goal of price stability. Price stability preserves the value of money. The current policy framework entails price stability as the main goal of monetary policy, indirect policy instruments, a framework for forecasting inflation, regular policy review meetings of the Bank's Monetary Policy Committee (MPC). Notwithstanding the similarity with the inflation targeting framework, the Bank does not as yet formally target inflation, as some of the essential pre-requisites are not in place. Implementation of monetary policy decisions is principally through open market operations conducted by the Financial Markets Department. The basics of monetary policy provide users with explanations of major concepts and essential terminology. The policy stance over the course of the year is publicly announced in the annual Monetary Policy Statement (MPS), which is published in February each year. In addition, the Bank publishes three issues of the Monetary Policy Reports, following the April, August and October MPC meetings Discussion and data relating to recent monetary policy developments are also included in other Bank publications, including Annual Reports and Botswana Economic Financial Statistics.