An International Monetary Fund (IMF) team led by Édouard Martin visited Gaborone, Botswana, from September 15 to 26, 2025, for the annual Article IV consultation. The discussions focused on recent economic developments and policy recommendations for the country.
According to a statement by Mr. Martin, Botswana’s economy contracted by 3 percent in 2024 after growing by 3.2 percent in 2023. The diamond sector faced significant challenges due to competition from lab-grown diamonds and lower demand from China. Mining output dropped by 24 percent, and non-mineral growth slowed to 2.8 percent.
The current account balance shifted from a surplus of 1.5 percent of GDP in 2023 to a deficit of 4.2 percent in 2024 as exports declined despite increased revenue from the Southern African Customs Union (SACU). International reserves also fell to about five months of import cover.
Inflation has stayed below the Bank of Botswana’s target range but is expected to return within the desired band as depreciation of the Pula affects consumer prices. Since August 2024, the central bank has maintained its policy rate at 1.9 percent.
To support competitiveness and foreign exchange reserves, authorities allowed a faster depreciation of the Pula starting July 11th and widened its trading margin. As a result, the currency weakened by six percent against the U.S. dollar and nearly nine percent against the South African rand.
On fiscal matters, preliminary data show that Botswana’s budget deficit grew further in fiscal year 2024/25 to reach 7.1 percent of GDP due to falling mineral revenues and higher current spending only partially offset by reduced capital expenditure. Public debt now exceeds thirty percent of GDP.
Mr. Martin stated: “Looking ahead, the economy is expected to contract by about 1 percent this year, as historically high stocks of diamonds restrain new mining activity, and as activity in other sectors slows down as the government reduces its spending.” He added that medium-term growth could recover above four percent if reforms are implemented for fiscal sustainability and economic diversification.
He also noted: “While the banking sector remains well capitalized and profitable, liquidity has tightened.” He recommended accelerating implementation of outstanding Financial Sector Assessment Program recommendations to strengthen financial stability.
Further measures suggested include boosting private sector participation, diversifying exports, improving public investment efficiency, enhancing domestic revenue mobilization, streamlining government wages and social programs, managing state-owned enterprises more effectively, reducing regulatory barriers for business creation, and promoting financial deepening.
“The initiatives launched by the government aimed at reducing wasteful public spending…are welcome,” Mr. Martin said regarding ongoing reforms under Botswana’s Economic Transformation Program.
He concluded: “We would like to thank the authorities for their hospitality and highly constructive dialogue during the Article IV consultation.”