Botswana’s economy is expected to grow this year after two consecutive years of contraction, but government debt is projected to exceed the statutory ceiling due to another large budget deficit, Finance Minister Ndaba Gaolathe said on Monday.
In his budget speech, Gaolathe projected economic growth of 3.1% for this year, compared with estimated contractions of 0.4% in 2025 and 2.8% in 2024.
The Southern African nation, often seen as an African economic success story, has been hit hard by a prolonged slump in the global diamond market, influenced by economic uncertainty and the increasing popularity of lab-grown diamonds.
Diamonds typically account for roughly one-third of Botswana’s national revenue and three-quarters of its foreign exchange earnings.
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According to Reuters, Gaolathe told lawmakers that the budget deficit for the fiscal year starting in April is forecast at 26.35 billion pula ($1.91 billion), equivalent to 8.9% of gross domestic product (GDP). This follows a predicted deficit of 25.48 billion pula for the current fiscal year.
“This reflects a structurally overstretched fiscal framework, in which expenditure commitments persistently exceed available and realistic realisable resources,” the minister said.
The country’s debt-to-GDP ratio is expected to reach 38.77% by March 2026 and 44.66% by March 2027, surpassing the statutory debt ceiling of 40% of GDP.
“While such an increase may generate short-term credibility concerns, these are outweighed by the significantly greater economic risks that would arise from the sharp fiscal consolidation needed to stay within the existing ceiling,” Gaolathe added.
He emphasized the urgent need to accelerate economic diversification and strengthen growth outside the mining sector.
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Image Credit: Forbes Africa
