October 24, 2017 / 11:05 AM / 10 months ago

UPDATE 1-Botswana cuts interest rates to record low of 5 percent

(Adds details, economist’s comment)

GABORONE, Oct 24 (Reuters) - Botswana’s central bank cut its benchmark lending rate to a record low of 5 percent on Tuesday, citing positive inflation outlook and efforts to stimulate economic activity.

The small but relatively wealthy southern African country, whose chief exports are diamonds and beef, has struggled to grow its economy at faster pace since 2015 when commodity prices collapsed and regional drought hit hard.

“The current state of the economy, both the domestic and external economic outlook as well as the inflation forecast, provides scope for easing monetary policy to support economic activity without undermining maintenance of inflation within the bank’s medium-term objective range of 3 – 6 percent,” said governor Moses Dinekere Pelaelo.

Botswana’s economy expanded 1.9 percent in the second-quarter, well below an average of 5 percent annual growth in the first-half of the decade.

The bank said it did not expect inflation to move significantly from the current levels for the rest of the year after easing to 3.2 percent in September from 3.4 percent a month earlier.

Econsult’s economist and former Bank of Botswana deputy governor Keith Jefferis said the rate cut would not encourage consumers to take on more credit because households were already grappling with high personal debt levels, but expected lending to businesses to improve. (Writing by Tiisetso Motsoeneng; Editing by James Macharia)

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