Botswana’s economy is forecast to rebound in 2026 after two years of decline, although increasing fiscal deficits are likely to drive public debt above the government’s legal ceiling, Finance Minister Ndaba Gaolathe said.
Speaking during the national budget presentation on Monday, Gaolathe projected 3.1% economic growth for 2026, following estimated contractions of 0.4% in 2025 and 2.8% in 2024.
The Southern African nation, widely seen as one of Africa’s most stable economies, has been affected by a prolonged slump in the global diamond market. Weaker demand, global economic uncertainty, and the growing popularity of lab-grown diamonds have all weighed on export revenues and government income.
Diamonds continue to underpin the economy, accounting for roughly one-third of government revenue and about three-quarters of foreign-exchange earnings, Business Day reports.
Even with a projected economic rebound, public finances remain strained. The budget deficit for the fiscal year beginning in April is expected to reach 26.35 billion pula ($1.91 billion), or 8.9% of GDP, up from a projected 25.48 billion pula ($1.9 billion) deficit in the current fiscal year.
Gaolathe noted that the growing deficit stems from a persistent gap between spending obligations and realistically available resources, exposing deeper structural weaknesses in fiscal management.
Consequently, Botswana’s debt load is set to climb. The debt-to-GDP ratio is projected to reach 38.7% by March 2026 and rise further to 44.6% by March 2027, surpassing the current statutory limit of 40%.
The minister recognised that breaching the debt ceiling could raise short-term concerns among investors and markets. However, he argued that the economic harm from drastic spending cuts needed to stay within the limit would be even greater.
He underscored the urgent need to accelerate economic diversification and bolster non-mining growth, stressing that reducing reliance on diamonds is crucial for restoring long-term fiscal sustainability and strengthening economic resilience.