Botswana Mining Review Comprehensive Coverage of the Progress and Achievements in the Mining Sector
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Botswana’s diamond-dependent economy is facing a significant downturn, with the International Monetary Fund (IMF) warning that the slump in the global diamond market is dragging down growth. After expanding by 3.2% in 2023, the economy contracted sharply by 3% in 2024, primarily due to “strong headwinds” facing the diamond industry, including fierce competition from lab-grown gems and tepid demand from China.
The nation’s gross domestic product (GDP) is forecast to contract again by about 1% this year, a direct result of further declines in diamond output, before a potential recovery in 2026. The diamond sector is the undisputed bedrock of Botswana’s finances, typically contributing about 30% to GDP and accounting for roughly 85% of all exports.
Fiscal and External Balances Deteriorate
IMF Botswana mission chief Édouard Martin reported that the country’s mining output plunged by 24% in 2024, coinciding with a regression in non-mineral activity.
The fallout from diminished exports has severely eroded the country’s external position. Martin noted that the current account balance swung from a 1.5% of GDP surplus in 2023 to a deficit of 4.2% of GDP in 2024. Concurrently, international reserves have fallen to cover just five months of imports.
The fiscal picture is equally strained. Preliminary estimates for the 2024/25 financial year indicate the fiscal deficit widened to 7.1% of GDP. This was driven by a steep decline in mineral revenues and an increase in recurrent spending, which outweighed a reduction in capital expenditure. As a result, public debt has surpassed 30% of GDP.
Pula Devaluation and Subdued Inflation
In a move to protect domestic industries and conserve foreign reserves, authorities increased the rate of the pula’s depreciation against its currency basket effective July 11, simultaneously widening the trading margin. The currency has since fallen 6% against the US dollar and 8.6% against the South African rand.
Despite the recent currency adjustments, inflation has remained stubbornly below the Bank of Botswana’s (3% to 6%) target range. The central bank has kept its policy rate steady at 1.9% since August 2024. Inflation is, however, expected to return to the target range in the coming months as the pula’s recent depreciation feeds into consumer prices.
Reforms Crucial for Medium-Term Outlook
Looking ahead, the IMF projects a modest recovery to more than 4% growth over the medium term, contingent on Gaborone implementing “ambitious reforms.” These are vital to ensure fiscal and external sustainability and, most critically, to diversify the economy away from its reliance on diamonds.
The Fund welcomed the government’s existing initiatives under the Botswana Economic Transformation Programme to curb wasteful public spending and promote private-sector investment. However, it strongly urged for a deeper push, recommending:
- Enhancing domestic revenue mobilization.
- Streamlining the public wage bill.
- Strengthening the management of State-owned enterprises.
- Creating a more conducive business environment by reducing red tape.
The IMF encouraged the government to incorporate these structural reforms into its new five-year National Development Plan to build financial sector resilience and accelerate economic growth and job creation.
