low commodity prices continued to weigh down on economic performance in commodity exporting countries. international oil prices, however, recovered during 2016, partly in response to the agreement by major producers to reduce production ; therefore, potentially generating upward pressure on inflation. following a generalised decrease in the previous two years, global food prices also increased in 2016. due to these factors, global inflation increased slightly from 2. 8 percent in 2015 to 2. 9 percent in 2016, but much lower than the forecast of 3. 4 percent at the beginning of the year. as regards botswana ’ s trading partner countries, inflation remained low in the special drawing rights ( sdr ) countries ( comprising the united states of america, euro zone, china, japan and the united kingdom ). average inflation for these countries increased from 0. 7 percent to 1. 7 percent in the same period. in contrast, inflation in south africa breached the upper end of the target range, peaking at 6. 8 percent, mainly because of weakness of the south african rand and food price pressures. overall, average inflation for the trading partner countries increased from 2. 8 percent to 4. 2 percent during 2016. domestic inflation in botswana, inflation was low and stable, and fluctuated around the lower end of the desired objective range of 3 percent, hence broadly consistent with projections for the year. inflation reached a record low of 2. 6 percent in august 2016. the low rate of annual price increase was generalised across most categories of goods and services. however, food price inflation increased from 0. 7 percent in 2015 to 3. 9 percent in 2016. also, the reduction of 3. 3 percent in fuel prices in 2016 was small compared to a 15. 7 percent decrease in the prior year. in addition to benign external price developments, modest inflation in botswana was also indicative of subdued domestic demand, against the background of sluggish economic activity and restrained growth in personal incomes. among the influences on domestic demand are growth in government expenditure, wages and credit. taking these three elements in turn, government expenditure increased by 9. 7 percent in 2016, virtually the same rate of expansion as in the previous year. it should be recognised, in this respect, that the short - term impact of government spending on domestic demand is moderated to the extent that a significant component involves infrastructure and capacity development. in the context of botswana, this type of spending tends to be import intensive and, also, the economic benefits of such public investments are derived in the medium

founding in 1975, by seeking to align fiscal, monetary and exchange rate policies. this is facilitated by regular consultations between the government and the bank, accompanied by operational and policy transparency through, among other avenues, periodic economic briefings. when i joined the bank shortly after its establishment, i did not envisage that, 23 years later in 1999, i would head it as governor and board chairman. nor did i know that during my tenure, i would be involved in what i consider a professionally fulfilling wide range of activities at regional and international levels. over time, i have learned the importance of the bank continuously adapting to evolving circumstances. indeed, the bank is much changed from when it was first established. while still operating under broadly the same mandate of promoting monetary stability and maintaining a sound financial system, the governing legislation has been subject to a number of reviews ; and there have been several reorganisations to accommodate the evolving nature of responsibilities. monetary policy implementation is now benchmarked against international practice, and the policies and guidelines for managing the foreign exchange reserves are regularly revisited. banking regulation and supervision are increasingly risk based and, accordingly, financial stability has also assumed centre stage. in all these endeavours, i counted and continue to rely on the support of structures at home and abroad ; this includes colleagues, counterparts and bilateral establishments, such as the official monetary and financial institutions forum. director of ceremonies, chairman of the omfif advisory board, co - chairpersons of omfif, the forum ’ s award jury, fellow governors, distinguished ladies and gentlemen, i end by reiterating my eternal gratitude for the generous acknowledgement of my work, as evidenced by the conferment on me of the official monetary and financial institutions forum ’ s lifetime achievement award. i embrace it. thank you for your attention. bis central bankers ’ speeches