22.05.2026
Botswana’s economy remained under severe pressure in 2025 as the prolonged downturn in the global diamond market continued to weigh on mining, exports, fiscal revenue and confidence. Growth is expected to recover gradually in 2026–2027, but the rebound will be modest because diamond demand remains well below historical levels and fiscal space is tight. Inflation is projected to rise in 2026 due to electricity tariff increases and currency depreciation, before easing toward the middle of the Bank of Botswana’s target range. Fiscal pressures are significant, with large deficits and rapidly rising public debt. The external position improved temporarily in 2025, but is expected to return to deficit as the diamond recovery remains incomplete.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | -0.9 | 2.7 | 3.2 |
| Inflation (%, yoy) | 2.7 | 5.5 | 4.5 |
| International poverty rate ($3.00, 2021 PPP, %) | 20.1 | 19.7 | 19.4 |
| Fiscal balance (% of GDP) | -6.5 | -7.1 | -6.9 |
| Gross public debt (% of GDP) | 39.5 | 44.3 | 47.0 |
| Current account balance (% of GDP) | 1.5 | -1.0 | -1.2 |
Growth recovers only gradually after the diamond shock
Botswana’s real GDP is estimated to have contracted by 0.9% in 2025, following a sharper 2.8% decline in 2024. The downturn was driven mainly by the diamond sector, where weak global demand, high inventories and structural competition from synthetic diamonds reduced mining activity and export revenues. A temporary rebound in mining during 2025 provided some support, but scheduled maintenance at the largest production site and weak activity in construction and utilities limited the recovery.
Growth is projected to return to positive territory in 2026, at 2.7%, and strengthen to 3.2% in 2027. The recovery is expected to be supported by a modest improvement in diamond sales, better electricity supply and reforms to improve the business climate. However, the outlook remains fragile because diamond demand is expected to remain far below historical levels.
Inflation rises but remains broadly contained
Inflation averaged 2.7% in 2025, but price pressures increased toward the end of the year as the pula depreciated against the rand. The Bank of Botswana responded with a significant policy-rate increase in late 2025 to contain inflation risks and stabilise market conditions.
Inflation is projected to rise to 5.5% in 2026, driven by electricity tariff increases, currency depreciation and imported cost pressures. It is expected to ease to 4.5% in 2027, broadly within the Bank of Botswana’s 3%–6% objective range. Upside risks come from higher oil prices, further currency depreciation, electricity tariffs and regional supply-chain pressures.
Fiscal pressures remain severe
The fiscal deficit narrowed to an estimated 6.5% of GDP in 2025, but it remains very large by Botswana’s historical standards. Lower mineral revenues, rigid current spending and reduced fiscal buffers have placed the budget under significant pressure. The Government Investment Account at the central bank has been drawn down sharply, reducing the country’s traditional liquidity cushion.
The deficit is projected to widen to 7.1% of GDP in 2026 before narrowing slightly to 6.9% in 2027. Public debt is expected to rise from 39.5% of GDP in 2025 to 47.0% in 2027. Fiscal consolidation will require stronger domestic revenue mobilisation, tighter recurrent spending control, wage-bill discipline and careful prioritisation of capital projects.
External position remains exposed to diamonds
Botswana’s current account shifted to a surplus of 1.5% of GDP in 2025, supported by some recovery in diamond exports and concessional financing. International reserves also improved during the year. However, the external improvement is expected to be temporary.
The current account is projected to return to deficit, at 1.0% of GDP in 2026 and 1.2% in 2027. The main vulnerability remains the heavy dependence on diamonds, which account for around 80% of exports and a significant share of government revenue. Lower diamond prices, weaker demand from major markets or delays in mining recovery would quickly weaken the balance of payments and fiscal position.
Overall outlook
Botswana’s outlook remains challenging. Growth is expected to recover in 2026–2027, but only gradually, and fiscal pressures will remain high. Inflation is likely to stay within the central bank’s target range, but risks are tilted upward. The main policy challenge is to restore fiscal sustainability while accelerating diversification away from diamonds. Stronger private-sector development, tourism, financial services, agribusiness, regulatory reform, skills development and better-targeted social spending will be essential for rebuilding inclusive growth.
Sources:
World Bank, Botswana Macro Poverty Outlook, April 2026.
International Monetary Fund, Botswana: 2025 Article IV Consultation and Staff Report, December 2025.
International Monetary Fund, World Economic Outlook, April 2026.
Bank of Botswana, Monetary Policy Report, April 2026.
African Development Bank, Botswana Country Focus Report, 2025.
