The Heat Turns On BoB

Finance tasks the BoB with providing unbiased, straightforward and objective advice “We are failing to adjust to new reality” – Finance PS “We need to rise above individual business interests and place the country at the forefront” - Finance PS Former governor advises BoB to guard against potential capture Says ‘trust deficit affecting the central bank’s transmission mechanisms’ “Monetary policy is for Botswana, not just for businesses and government.” ‘Government behaviour also needs scrutiny.’ Permanent Secretary in the Ministry of Finance Dr. Tshokologo Alex Kganetsano has tasked the Bank of Botswana (BoB) with providing the government with unbiased, straightforward and objective financial and economic advice to assist in implementing structural economic reforms. Speaking at the launch of the 2026 Monetary Policy Statement (MPS) this week, Dr. Kganetsano, a former BoB deputy governor, said he is often surprised when the current economic situation is presented as an emergency. “We have long known that if we don’t do anything in diversifying the economy, we will be where we are today, that has always been known,” he said. “Actually, the need to diversify the economy is something that I learnt of when I was still young at the University of Botswana. For more than 30 years, we have been talking about it with little or no traction on the ground.” Dr. Kganetsano said the country can move forward only if citizens, individually and collectively, acknowledge that they have failed the nation to the extent that it remains heavily dependent on diamond-financed government spending. “There is a reason why when diamonds do not sell, the government doesn’t spend that much, and liquidity in the banking space dries up, and interest rates go up,” he said. “This is a structural shift rather than a cyclical one. Structural in the sense that this is the longest period within which we have gone without selling diamonds properly since April 2023, and therefore requires structural adjustments.” The permanent secretary said structural adjustment is inherently painful. “If we were to transform this economy, we need to be prepared to take the pain, and implement meaningful structural adjustments,” he said. “The pain will be much less if we do it voluntarily rather than wait until somebody comes and imposes those on us and I see us fast-moving in that direction because I sense that we are failing to adjust to this new reality, and it is business as usual.” Dr. Kganetsano said his demand to the central bank is to provide unbiased and straightforward objective financial and economic advice without fear or favour. “We are going to have to implement those painful decisions,” he said. “We need to rise above individual business interests and place the country at the forefront.” Also speaking at the event, former BoB governor Moses Pelaelo said he has come to appreciate that a crisis should never be wasted. Pelaelo said the required reforms must be implemented with honesty and integrity. “Forward-looking policy posture should not just confirm our reality. It must change us because we need to change our reality and not reinforce it,” he said. “What we have today is not what we should have.” He advised the governor to guard against potential capture by industry, government, the media and other influential voices. “Remember that the monetary policy is for Botswana, not just for businesses and government,” he said. He also cited a trust deficit affecting the central bank’s transmission mechanisms. “Communication comes through the market rates and policy rates, for instance, we continue to compute our real monetary condition index using policy rates,” he said. Pelaelo said if bankers, households, government and industry do not trust the central bank, it will struggle to inject the necessary oxygen to keep the economy running properly. “Look at direct lending to government or bond yields, and say here is risk-free instrument that comes from the market and look at the prices that the government is dealing with,” he said. He said the 2026 MPS did not sufficiently project risks and risk management, both from the performance of the external sector and the behaviour of government. “It is important that we fix this from a point of view that we are having a managed fixed exchange rate regime and the performance of the external sector is extremely poor,” he said. “If we can’t have an honest conversation whether or not crawling peg exchange rate regime is appropriate in the context of diminished foreign exchange reserves, then we are not being honest.” According to Pelaelo, government behaviour also needs scrutiny, and rule-based fiscal discipline should be respected. “There is no nation across the world that progresses on rent-seeking behaviour where we become hunters and gatherers of things then we sell them,” he said. “More importantly, what the government gives its citizens, it must first take it from its citizens.”

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The Heat Turns On BoB

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