linah k mohohlo : 2003 monetary policy statement statement by mrs linah k mohohlo, governor of the bank of botswana, gaborone, 25 february 2003. * * * introduction i am privileged and honoured to welcome you to this important event in the calendar of the bank - the presentation of the monetary policy statement for 2003. let me begin by refreshing memories on the objective and content of the monetary policy statement, which the bank of botswana issues every year. the statement serves several purposes. first, it provides an opportunity for the bank to report on inflation and monetary policy developments in the previous year, and to present its assessment of the outlook for inflation in the current year. second, it enables the bank to outline policy issues and the approach that will be taken in formulating its policy stance in response to inflation - related developments throughout the year. third, the monetary policy statement contains, certainly since last year, the bank ’ s annual objectives for inflation and credit growth, and an explanation of how these are derived. the statement, therefore, plays an important role in conveying to stakeholders and the public at large a range of information relating to one of the bank ’ s core functions - the formulation and implementation of monetary policy. while the transparency entailed in the presentation of the monetary policy statement is important in its own right, it is also important in influencing economic and financial expectations, as well as the behaviour of economic agents. the bank ’ s aim is to engender a public expectation of sustainable low inflation consistent with the broad objective of macroeconomic balance as a basis for sustainable growth. in addition, the statement serves as a vehicle for enhancing the accountability of the bank to its stakeholders. in my remarks this evening, i will present only the main highlights of the full text of the 2003 monetary policy statement. it is important, therefore, that you take the time to read the full text of the statement, so you can obtain a more detailed analysis of monetary policy developments. i will briefly review the behaviour of inflation in 2002 and its underlying causes, before assessing the extent to which monetary policy succeeded in achieving its objectives in 2002. i will then outline the bank ’ s view of prospective economic and financial developments in 2003 and, on the basis of that assessment, the policy outlook for the current year. the bank ’ s monetary policy framework and objectives i believe you are aware that the principal objective of monetary policy in botswana, as it is for most central banks around the world

, collectively looking ahead and, in this regard, there are several aspects of mandates and operations of the bank that require modernisation and upgrading in order to remain relevant and contribute to national development aspirations and objectives. indeed, monetary policy and the various instruments, including communication, can only be effective if undertaken alongside improvements in other operations of the bank and policy transmission channels. aliow me to highlight four relevant areas in this regard. modernisation and adaptation of the bank ’ s functions first, there is a need to adapt to changing domestic and global conditions and, also, to ensure that the bank of botswana is appropriately positioned to adequately address new developments and related challenges. some of these include fintechs, digital currencies and similar innovations as well as adopt best practice, to sustain national development. in this regard, there is ongoing review of the bank of botswana act, the banking act and proposals to promulgate a national payments law. the intention is to enhance operational capability, predictability and integrity of policy and regulatory frameworks, as well as to clarify institutional relationships and promote accountability and transparency. furthermore, one of the key lessons from the 2008 / 9 global financial crisis is the need for joint, speedy and coordinated response, by all relevant stakeholders, to any substantial systemic risks emanating from any parts of the financial sector. as part of the broader financial development architecture, there is a need to re - configure institutional arrangements for the financial sector oversight to achieve greater focus on macro - prudential dimensions of financial stability policy and financial safety nets. the recent establishment of the financial stability council is a significant step towards protecting the viability, integrity and sustainability of relationships and cross - holding of exposures within the financial sector and with other economic sectors. as i mentioned, this enables coordinated and decisive response when needed ; ultimately safety of savings and investments and prospects for attracting more. also, one of the key tenets, in this respect, include the need for legislation for the establishment of a deposit protection scheme, to further encourage patronage of the domestic financial system, in particular broader financial inclusion. monetary policy framework distinguished guests, the second area of continuing improvement that i want to highlight relates to the role of the monetary policy framework in facilitating a conducive environment for private businesses to thrive. broadly, an appropriate policy framework should encompass definition and clarity of objectives and instruments, understanding and calibration of transmission channels and, therefore, predictability and, in turn, accountability. it is