Botswana will cut its 2025 economic growth forecast to almost zero due to a prolonged downturn in the global diamond industry, with the budget deficit also widening due to reduced diamond revenue.
Botswana is the world’s leading producer of diamonds by value and its economy largely depends on diamond exports, which typically account for 30% of national revenues and 75% of foreign exchange receipts.
In the 2025 budget announced in February, finance minister Ndaba Gaolathe had projected 3.3% growth this year based on an expected rebound in the diamond market.
For the 2025/26 financial year, running from April to March, he had forecast a budget debit of 7.56% of gross domestic product, lower than the last financial year’s estimated deficit of 9% of GDP.
However Permanent Secretary in the Ministry of Finance, Dr Tshokologo Kganetsano, told a parliamentary audit meeting on Monday that those estimates were no longer possible to achieve.
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“In view of what has happened since February, we are going to revise this growth forecast downwards. We do have a preliminary figure of close to zero percent, but that figure has to be interrogated internally before we can officially publicise it,” Dr Kganetsano said.
The International Monetary Fund expects Botswana’s economy to contract by 0.4% this year.
Botswana’s economy contracted by 3% in 2024 largely due to the diamond market downturn, but the government had expected mineral revenues, including diamonds, to more than double this year, which would help it avert another recession.
“The trend doesn’t seem to show any improvement, instead it is deteriorating. As a result of a slowdown in inflows we find ourselves sitting on some unpaid invoices to government suppliers. A significant decline in the country’s revenues has resulted in mass liquidity challenges threatening the financial sustainability of the government’s operations,” said Dr Kganetsano, adding that this has compelled the Ministry of Finance to consider several means in order to fund the 2025/2026 budget as part of its core mandate of resource mobilisation.
“We had forecast a deficit of about P22 billion for the current budget year, which was premised on the collection of diamond mineral revenues of around P17 billion but the current situation might lead to the need to revise the figure downwards owing to a decline in diamonds sales,” he said, further indicating that the forecast in revenue was made prior to the American administration tariffs imposition that had a negative impact on the global economic activities.
However, since the 2024/25 financial year, the Ministry of Finance has come up with several interventions such as not allowing ministerial supplementary budget allocations but rather encouraging ministries to implement hostility cost cutting measures.
In an effort to ramp up revenue collection, there is intent to present to Parliament the new Tax Administration Act, which aims to harmonise tax rules in the Value Added Tax and Income Tax acts as well as reducing compliance time for tax payers and eliminate duplication in paying and filing taxes.
