World Economics - Insight , Analysis and Data

World Economics - Insight , Analysis and Data
Monetary Policy, Governance and Economic Development
Michael Chibba
World Economics, September 2007

Botswana is at a crossroads, as economic growth has slowed significantly in recent years while social problems remain largely unresolved. Exacerbating this situation is a monetary policy in crisis as over a decade of generally high interest rates have failed to address inflationary pressures. Thus, the Botswana experience challenges generally accepted wisdom on the relationship between interest rates and inflation. The main lessons learned highlight the need for (i) enhancing the knowledge and information base; (ii) tempering monetary policy to prevailing mores; and (iii) ensuring the provision of good governance at the central bank. Policy and programme recommendations that are offered are relevant not only to Botswana but also to other developing countries that face similar challenges.
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