excess liquidity. in turn, this resulted in a period of rapid credit growth by commercial banks, compared to a slower increase in deposits ; thus resulting in a sharp increase in the intermediation ratio, which is simply a ratio of bank loans to deposits. this ratio increased from 53. 1 percent at the end of 2010 to 87. 6 percent in a period of four years to the end of 2014. in essence, funds previously held in bobcs have been diverted to loans by banks and more than doubled – growing by 104. 3 percent, from p22. 1 billion in december 2010 to p45. 2 billion in january 2015. these funds have been effectively absorbed by the economy, to the benefit of businesses and households. deposits increased at a slower pace of 31. 7 percent from p40. 4 billion to p53. 2 billion in the same four - year period. the slower growth in deposits is possibly due to, among others, sluggish growth in incomes, inadequate financial inclusion, more streamlined procedures for government funding of parastatals and very low interest rates paid by banks on deposits. as funds available for lending become exhausted, it is inevitable that credit expansion would slow down. however, credit has continued to grow at a robust pace, as evidenced by the january 2015 annual growth rate of 13 percent, which is higher than nominal economic growth. in situations of tighter liquidity, banks tend to tighten lending criteria, while taking bis central bankers ’ speeches measures to boost deposits. even then, current developments do not suggest that new lending will cease completely, as growth in deposits remains positive. it is indeed imperative that banks undertake measures to attract deposits, and focus on productive use of more limited funds available for lending. more emphasis on deposit mobilisation and improved financial inclusion would be steps in the right direction towards a more mature banking sector. there are also complementary measures that the bank of botswana stands ready to undertake in support of banks as they review their operations in an environment of reduced liquidity. these include a reduction of the primary reserve requirement and enhanced access to bank of botswana lending facilities. it is with this in mind that i wish to take this opportunity to inform you and, through you, all stakeholders that the bank of botswana has decided to reduce the primary reserve requirement for banks from the current 10 percent to 5 percent, with effect from april 1, 2015. this will release a total of p2. 3 billion to augment the banks ’ loanable funds. thank

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