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 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 consistent with the monetary policy posture.
The banking sector in Botswana has maintained a net positive position (excess liquidity) 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 can 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 dictated by the Bank Rate (policy rate).
OMOs are centered around weekly sales through auctions of the 7-day BoBC. BoBCs are instruments used 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). These fine-tuning OMOs are available both during and at the end of the day. The Bank also offers a credit facility (the Secured Lending Facility, or SLF) to local 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 square negative closing positions of local commercial banks.
Effective conduct of these various instruments that constitute the Bank’s OMOs requires daily forecasts of market liquidity to determine liquidity conditions. In addition, a variety of money market data are published, including the BoBC auction results summary (published weekly on this website under latest news). These are also included in the Bank’s various statistical publications, including the Annual Report and Botswana Financial Statistics (BFS), as well as on this website.