Inflation in Botswana

A short history of inflation in Botswana

Diamonds and the Crawling Peg (1976 onwards)

Botswana has had one of Africa's steadiest price records, and the reason is the management of its diamond revenue. Rather than spending it as it arrived, the government accumulated reserves and ran surpluses for decades, which kept domestic demand from outrunning what the economy could supply.

The pula is managed against a basket of the South African rand and the special drawing right, adjusted gradually rather than in steps, which smooths the effect of its largest trading partner's currency. Inflation therefore tracks South Africa's fairly closely but with less volatility, and the sharpest movements come from fuel and from administered price changes rather than from domestic demand.

Post-Covid Inflation (2021 to 2023)

In Botswana, prices rose fastest in August 2022, at 14.6%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.