Botswana’s economy is expected to grow this year after two consecutive years of contraction, but public debt is likely to exceed the legal ceiling set by the government due to another high budget deficit, the country’s finance minister, Ndaba Gaolathe, said on Monday (9).
In his budget presentation speech, Ndaba Gaolathe said that economic growth for this year is estimated at 3.1%, after contractions of 0.4% last year and 2.8% in 2024.
The economy of the southern African country, long considered a success story on the African continent, has been hit hard by a prolonged slowdown in the global diamond market, driven by economic uncertainty and the growing popularity of lab-grown stones.
Diamonds typically account for about a third of Botswana’s national revenue and about three-quarters of its foreign exchange earnings.
Gaolathe told lawmakers that the budget deficit for the fiscal year beginning in April is expected to be $1.91 billion, or 8.9% of gross domestic product (GDP).
“This scenario reflects a structurally overburdened budgetary framework, in which expenditure commitments persistently exceed available and realistically mobilizable resources,” said the minister.
Public debt as a percentage of GDP is expected to reach 38.77% by March 2026 and 44.66% by March 2027, exceeding the legal limit currently set at 40% of GDP.
“While such an increase may raise credibility concerns in the short term, these are outweighed by the significantly greater economic risks that would result from the abrupt fiscal consolidation necessary to remain within the current limit,” Gaolathe added.
According to the minister, it is urgent to accelerate economic diversification and strengthen sources of growth outside the mining sector.
Source: Reuters
