2 hours agoInterest payments on government debt projected to reach P6.3 Billion in 2026/2027

New data from S&P Global Ratings reveals that Botswana’s Finance Ministry is expected to spend P6.3 billion on interest payments for government debt during the 2026/2027 fiscal year. This follows an increase in borrowing aimed at covering the country’s growing budget deficit. Botswana’s budget deficit is projected to hit P25.48 billion in the 2025/2026 fiscal year, up sharply from the P11.8 billion deficit recorded in 2024/2025.

The deficit is forecast to rise further to P26.35 billion in the current 2026/2027 fiscal year. In response, the government has adopted a new borrowing strategy. The Finance Ministry began conducting monthly bond auctions this week as part of efforts to raise capital for the 2026/2027 deficit.

The plan calls for borrowing P12 billion from local capital markets, supplemented by additional funds from external sources. According to the Finance Ministry, the deficit will be financed through bond sales, treasury bill sales, and external borrowing from multilateral development agencies. “The budget deficit for FY 2026/2027 is forecast to be BWP26.35 billion; this will be financed by bond sales of BWP10 billion and net Treasury bill sales of up to BWP2 billion, with a planned split as follows: short-dated bonds at BWP4 billion in eleven auctions and longer-dated bonds and index linked at BWP6 billion in eleven auctions,” the Ministry stated.

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The Ministry warned that the planned increase in borrowing to fund the deficit will likely drive government debt higher over the medium term. This trajectory is expected to increase the interest bill and limit government spending on priority projects. S&P Global Ratings data shows that interest payments on Botswana’s government debt have been climbing steadily: from P1.2 billion in 2021/2022 to P1.6 billion in 2022/2023, and P2.5 billion in 2023/2024.

The interest bill rose further to P3.3 billion in 2023/2025, with projections indicating it will reach P4.5 billion in 2025/2026 and escalate to P6.3 billion in the current financial year. S&P Global Ratings attributed the rising interest costs to increased borrowing needs, shallow domestic capital markets, and higher borrowing costs. “Botswana’s domestic borrowing costs have risen and we expect a continued rise.

While short-term rates were relatively low at the start of 2025, they increased sharply during 2025 and further into 2026,” the firm reported. The yield on the three-month Treasury bill jumped from 3.43 percent at the start of 2025 to 8.85 percent by the end of that year. “Yields continued to climb in 2026, with the short-term instrument exceeding 10.5 percent by March 2026 as the government increased its reliance on domestic debt to fund the budget deficit.

Our projections indicate that the overall interest bill will rise to 8.2 percent of general government revenue in 2026 and further to 11 percent by 2029,” S&P Global Ratings added. In response to these challenges, the government recently announced measures aimed at rebuilding financial buffers and reducing reliance on debt to finance budget deficits. These initiatives, officials said, will be carried out cautiously and gradually to ensure that public debt and debt-service risks remain within prudent and sustainable limits.

Analysts have noted that while Botswana’s government debt has historically been low, it is now rising rapidly. They caution that delays in implementing the government’s commitments to rebuild financial buffers and reduce borrowing could result in continued debt growth.

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