Botswana projects economic rebound but spiralling debt

Botswana’s economy is projected to grow this year after two successive years of contraction, but debt is expected to rise beyond the government’s statutory ceiling because of another large budget deficit, its finance minister said on Monday. In a budget speech, Ndaba Gaolathe said economic growth this year was forecast at 3.1%, compared to estimated contractions of 0.4% last year and 2.8% in 2024. Diamonds typically account for about one-third of Botswana’s national revenue and three-quarters of its foreign exchange earnings.

Gaolathe told lawmakers that the budget deficit in the fiscal year that starts in April was seen at 26.35 billion pula ($1.91 billion), or 8.9% of gross domestic product (GDP). That compares to a predicted deficit of 25.48 billion pula this fiscal year. “This reflects a structurally overstretched fiscal framework, in which expenditure commitments persistently exceed available and realistic realisable resources,” the minister said.

The debt-to-GDP ratio is estimated to reach 38.77% of GDP by March 2026 and 44.66% of GDP by March 2027, breaching the statutory debt ceiling currently set at 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. It was urgent to accelerate economic diversification and strengthen non-mining growth sources, he continued.