Botswana Economic Update: Seizing The Moment - How Botswana Can Turn A Crisis Into An Opportunity

Overview & Synopsis

This Economic Update argues that Botswana needs to shift its economic model. While this message has been repeated many times in the past, including across multiple government strategies, the urgency of such a shift is now greater than ever. Indeed, the government has largely exhausted its fiscal buffers after years of underperforming diamond exports and fiscal policy inertia that have led to a rapid increase in public debt, rising from about 22 percent of GDP in 2023 to nearly 40 percent in 2025. If not corrected, this recent increase will lead to an unsustainable debt trajectory, a concern already reflected in the significant rise in domestic interest rates in recent months. Beyond fiscal adjustment, the country also needs to diversify its export base, which remains heavily concentrated in diamonds, accounting for approximately 80 percent of total exports. This will require unleashing the potential of the private sector through the implementation of reforms to improve the business environment and facilitate better access to infrastructure and financial services, especially for new and small businesses. Moreover, private sector development and diversification ultimately depend on the availability of workers with the right skills. A key priority of the reform agenda will be to strengthen human capital, which is currently too low in Botswana compared to other upper-middle-income countries, and to align skills development more closely with labor market needs.