The operational implementation of monetary policy is undertaken through trading various money market instruments with the domestic banks. The money market operations are undertaken by the Bank of Botswana in the form of open market operations (OMOs). The aim of OMOs is to maintain liquidity and short-term interest rates at levels that are supportive of monetary policy.
The banking sector in Botswana has maintained a net positive position relative to the Bank over many years; consequently, the main instrument used in OMOs is weekly auctions of Bank of Botswana Certificates (BoBCs). Through the sale of BoBCs, the Bank is able to influence liquidity conditions in the domestic money market which, in turn, maintains short-term market interest rates in line with the monetary policy stance as indicated by the Bank Rate (policy rate).
OMOs are centred upon weekly sales by auction of 14-day BoBCs; in support of these short-term operations there are also monthly auctions for 91-day BoBCs. Since they are instruments to control liquidity in the banking system, and are not intended for general investment purposes, since March 2006 only commercial and merchant banks are allowed to hold BoBCs.
To facilitate the day-to-day liquidity management, the Bank also conducts repos and reverse repos (i.e., lending and borrowing of short duration using securities as collateral). For fine-tuning the OMOs both during and at the end of the day, the Bank offers a credit facility (the Secured Lending Facility, or SLF) for banks, where the borrowing rate is linked directly to the Bank Rate. The SLF is an example of a standby facility, offered in the Bank's capacity as lender of last resort to the commercial banks.
Effective conduct of these various instruments that constitute the Bank’s OMOs requires daily forecasts in order to determine liquidity conditions. In addition, a variety of money market statistics are published, including the BoBC auction summary (published weekly on this website under latest news), total outstanding BoBCs, etc. These are included in the Bank’s various statistical publications, including the Annual Report and Botswana Financial Statistics (BFS), as well as on this website.