“In this issue of the BIDPA briefing, we note that the growth in government spending may be unsustainable if not complemented by a rise in the economy’s productive capacity. This reinforces the need for the country to expedite its efforts to diversify away from the high dependence on mineral sector revenue. Botswana’s real interest rates continue to be well above those of its major trading partners. This trend can be explained by the use of interest rates as a monetary policy tool, as well as the weakening global environment, which has been
causing other countries to lower their interest rates in an attempt to resuscitate their economies. Total bank credit has been responding to higher lending rates, as reflected by the continued decline in the growth rate of lending to business and households, the effect of which has
contributed to reducing inflationary pressures and hence the inflation rate. Also in this issue, we discuss the new Southern African Customs Union Agreement, which was signed on the 19th of October 2001.”
