Botswana’s financial system remains stable and resilient, continuing to support households and businesses despite growing macro-financial risks, the Financial Stability Council (FSC) has said.
The FSC, a statutory body chaired by the Bank of Botswana Governor, Cornelius Dekop held its second regular meeting of the year on Thursday this week, where it reviewed developments in both global and domestic financial markets.
In a statement issued after the meeting, the Council noted that while the country’s financial sector remains sound, challenges such as subdued economic growth, climate-related risks, and sectoral vulnerabilities persist. These, it warned, require continued vigilance and, in some instances, proactive policy responses.
Globally, the FSC observed modest easing in financial conditions, with some recovery in asset prices since May 2025. However, it cautioned that vulnerabilities have deepened due to elevated asset valuations, growing sovereign debt burdens, and fragilities in foreign exchange markets. The expansion of non-bank financial institutions (NBFIs) into traditional credit markets has also heightened exposure to liquidity and market risks, necessitating stronger cross-sector supervision.
Domestically, the Council found that both banking and non-bank sectors are “safe and sound,” supported by adequate capital buffers, strong liquidity, and sustained profitability. Botswana’s non-performing loans (NPLs) ratio stood at 3.2 percent as of June 2025, with a negative credit-to-GDP gap — signs of overall financial health.
However, the FSC highlighted rising household indebtedness as an emerging concern. The 2024/25 Household Indebtedness Survey revealed growing debt-service-to-income ratios, especially among households reliant on unsecured credit. The Council warned that this trend could amplify credit risks under adverse economic conditions, threatening financial stability.
The Council also expressed concern over vulnerabilities in the sovereign sector, citing weak growth prospects, constrained fiscal space, and reduced external buffers due to the sluggish diamond market. These factors have tightened banking sector liquidity, raised funding costs, and led to higher lending interest rates.
In response, the FSC welcomed recent measures by the Bank of Botswana’s Monetary Policy Committee(MPC) to address liquidity distribution challenges and stabilise the Pula exchange rate. It underscored the importance of maintaining strong capital and liquidity buffers, enhancing stress testing, and strengthening macroprudential oversight.
The meeting also reviewed progress on regulatory reforms aimed at improving financial sector resilience. These include the commencement of the Banking Act, 2023 and related Banking Regulations, 2025, as well as the establishment of the Banking Appeals Tribunal. Additional reforms under the NBFIRA Act, 2023 and regulations governing collective investment undertakings and electronic payment services were also noted.
Furthermore, the FSC applauded ongoing work to bolster the Anti-Money Laundering and Counter-Terrorism Financing framework, essential for maintaining financial integrity and public confidence.
Overall, the Council concluded that Botswana’s financial system remains robust, supported by strong infrastructure, sound risk management, and proactive regulation. It reaffirmed its commitment to preserving financial stability and supporting the country’s broader macroeconomic and structural transformation agenda.
The next regular meeting of the FSC is scheduled for May 2026.
