GABORONE, Feb 10 – Botswana’s economy is expected to return to growth this year after shrinking for two consecutive years, although mounting fiscal pressures are set to push public debt beyond legally defined limits, Finance Minister Ndaba Gaolathe said on Monday.
Presenting the national budget to parliament, Gaolathe said economic output is forecast to expand by 3.1% this year. That compares with an estimated contraction of 0.4% last year and a deeper decline of 2.8% in 2024.
The Southern African nation, often cited as one of Africa’s most stable economies, has been weighed down by a prolonged slump in the global diamond market. Weaker demand, global economic uncertainty, and the growing acceptance of lab-grown diamonds have all hurt revenues.
Diamonds remain central to Botswana’s economy, accounting for roughly one-third of government revenue and about three-quarters of foreign exchange earnings.
Despite the expected growth rebound, public finances remain under strain. Gaolathe said the budget deficit for the fiscal year beginning in April is projected at 26.35 billion pula, equivalent to about $1.91 billion, or 8.9% of gross domestic product. This compares with a projected deficit of 25.48 billion pula in the current fiscal year.
According to the minister, the shortfall reflects a persistent mismatch between spending commitments and realistically available resources, pointing to deeper structural challenges in fiscal management.
As a result, Botswana’s debt burden is set to rise. The debt-to-GDP ratio is forecast to climb to 38.77% by March 2026 and further to 44.66% by March 2027, exceeding the current statutory ceiling of 40%.
Gaolathe acknowledged that breaching the debt limit could raise short-term concerns among investors and credit markets. However, he argued that the economic damage from aggressive spending cuts required to stay within the ceiling would be far more severe.
He stressed the urgency of accelerating economic diversification and strengthening growth drivers outside the mining sector, noting that reducing reliance on diamonds is critical to restoring long-term fiscal and economic resilience.
