Botswana’s foreign exchange reserves have dropped to alarming levels as the low demand for diamonds severely impacts the country’s mineral revenue.
As of the 31st May 2025, foreign exchange reserves had plummeted to just P0.9 billion from the balance of P42 billion in December 2024, highlighting a dire economic crisis.
Further, the level of foreign exchange reserves declined by 24% from P63.7 billion in December 2023 to P48.1 billion in December 2024, due to withdrawals during April 2024.
The downward spiral of the foreign exchange reserves is attributed to lower demand for natural diamonds which have been the mainstay of Botswana’s economy for the longest time.
Director of Financial Markets Department Baitshenotse Mmopelwa said the foreign exchange reserves are in a steady decline, attributing the decline to weaker sales of Botswana’s rough diamonds.
“Botswana accumulated significant reserves mainly from diamonds but recently there has been depletion, with the government now relying mostly on revenue from South African Customs Union (SACU). Mmopelwa said at a recent Bank o Botswana economic briefing for executives.
He noted that previously SACU revenue was a small contributor to foreign exchanges reserves and that now there is a significant shift, owing to slump in diamond sector performance.
“This is the same pool of funds which is used to pay for imports, building confidence with external investors as it underpins credit ratings as well as being of good use for cushioning the economy against external economic shocks,” he added, emphasizing that the current economic difficulties call for an urgent need to expedite diversification of the economy to shift from overdependence on diamonds.
As a result of the dire financial economic situation the country is facing, Botswana has been forced to turn to borrowing to address budget deficit as well as the dwindling cash challenges.
Last Thursday, Parliament unanimously approved a P6.7 billion loan comprising P4.06 billion from African Development Bank (AfDB) and P2.7 billion from OPEC Fund.
This comes swiftly on the heels of another P8.3 billion loan which was secured from Bank of Botswana and Botswana Public Officers Pension Fund (BPOPF) earlier.
Already, Bank of Botswana has distributed P4.1 billion in 2024 to the government compared to P860.5 million in 2023 after a transfer of the unrealised currency gain to the fair value revaluation and the currency revaluation.
The distribution to government comprised P838 million pre-set dividend and P3.2 billion residual income. Mmopelwa said the total assets of the bank decreased by P11.5billion (17.5%) to P54.2 billion from P65.7 billion in 2023.
