GABORONE, Aug. 29 (Xinhua) -- Botswana's central bank has slashed the country's repo rate by 25 basis points from 5 percent to 4.75 percent.

The Bank of Botswana on Thursday said the current state of the economy and outlook for both domestic and external economic activities has provided scope to ease monetary policy.

"Accordingly, the MPC decided to reduce the bank rate by 25 basis points to 4.75 percent. However, with inflation low and stable and inflation expectations well anchored, improving total factor productivity remains key in promoting sustainable and inclusive economic growth," said the bank governor Moses Pelaelo.

He said commercial banks are therefore required to make the necessary interest rate adjustments with immediate effect to reflect this policy decision.

Pelaelo said the country's GDP is projected to increase by 4.2 percent and 4.8 percent in 2019 and 2020 respectively.

According to the governor, the significant influences on domestic economic performance include conducive financing conditions as indicated by accommodative monetary policy and sound financial environment that facilitate policy transmission, intermediation and risk mitigation.

He said it is further anticipated that the increase in government spending, as well as implementation of initiatives, such as the doing business reforms, should also be supportive of economic activity.

"Overall, the economy is projected to operate close to, but below full capacity in the short to medium term, thus posing no upside risk to the inflation outlook," said the bank governor.