stability. as announced at the beginning of the year and broadly consistent with botswana ’ s trade pattern, the weights of the constituent currencies in the pula basket are 45 percent for the south african rand and 55 percent for the sdr. a downward rate of crawl of 1. 51 percent of the nominal effective exchange rate is also being implemented in 2020. with low inflation, the policy framework allows flexibility to further loosen real monetary conditions through a downward crawl to enhance competitiveness of the domestic industry and support economic growth. overall, both external and domestic pressures on inflation are expected to be benign, and it is projected that inflation will revert to within the bank ’ s 3 – 6 percent medium - term objective range from the second quarter of 2020. the forecast incorporates a possible hike in water and electricity tariffs, as well as the announced increase in public service salaries in the 2020 / 21 financial year. furthermore, it takes into account the small impact of the 1. 51 percent downward rate of crawl on import prices. having said that, i should be quick to caution that any upward adjustment in administered prices and government levies and / or taxes and any increase in international commodity prices that is substantially beyond current projections present upside risks to the inflation outlook. in contrast, downside risks to inflation arise from prospects of weak global economic activity, the tendency of the ongoing technological progress to lower costs and prices as well as a possible fall in international commodity prices. monetary policy stance distinguished guests, based on available data, the current projections suggest that domestic inflation will, in the short term, revert to and remain within the bank ’ s medium - term objective range of 3 – 6 percent. this favourable medium - term outlook for inflation is in the context of moderate growth in economic activity and a sound and stable financial system. therefore, prospective developments augur well for maintenance of an accommodative monetary policy that supports productive lending to businesses and households, resulting in welfare enhancements that also drive economic activity. the implementation of monetary policy will continue to focus on entrenching expectations of low, predictable and sustainable inflation, through timely responses to price developments ; while at the same time, taking due care to ensure that policy decisions are consistent with durable financial stability and support sustainable economic growth and employment creation. conclusion honourable minister and distinguished guests, i wish to conclude by underscoring that the continuing success in achieving price and financial stability, to which the bank remains fully committed must, in the end, involve the cooperation

earlier. oil prices were volatile, the euro area sovereign debt crisis worsened and this created turmoil in major financial markets, which brought about fears of renewed banking crisis. most industrial economies experienced persistent high levels of unemployment which, together with fiscal restraint, constrained demand. moreover, supply disruptions caused by the earthquake and tsunami in japan in march 2011 also adversely affected global production. overall, and despite higher output growth rates in emerging economies, global growth was dampened and the trend was economic slowdown in the second half of the year. although global inflation went up in 2011, it did not present a medium - term threat to the need for monetary policy to address the slowing economic activity ; neither did it present a threat to the need to address persistent high unemployment and idle capacity in major economies. as a result, most developed countries ’ central banks, including the united states federal reserve bank and the bank of england, maintained low policy interest rates throughout 2011. this was complemented by other measures such as adding liquidity to the banking system, which is referred to as quantitative easing. towards the end of the year, the european central bank reversed the earlier increase in interest rates and also introduced quantitative easing, in an effort to stabilise financial markets. similarly, some emerging market economies ( notably those of brazil and china ) that had earlier increased interest rates also loosened monetary policy by year - end. india was the exception in this respect, as monetary policy was tightened. here at home, the conduct of monetary policy was guided by a positive medium - term inflation outlook that reflected a low level of domestic demand and benign external influence on inflation. in the circumstances, the bank rate was maintained at 9. 5 percent in 2011. the commercial banks ’ prime lending rate was also unchanged at 11 percent. however, the bank implemented two measures. first, the primary reserve requirement for commercial banks was increased from 6. 5 percent to 10 percent with effect from july 2011, in order to reduce the amount of liquidity that is absorbed by bank of botswana certificates. bis central bankers ’ speeches second, four months later in november 2011, the maximum issuance of bank of botswana certificates to absorb excess liquidity was limited to p10 billion. the reduction of bank of botswana certificates issuance is intended to encourage banks to actively seek and finance bankable projects that would contribute towards economic diversification ; it would undoubtedly also contribute to their bottom lines. distinguished guests : it follows that the outlook for domestic inflation is predicated on expectations of slower