Botswana’s economy recorded early signs of recovery in the first quarter of 2026, with real Gross Domestic Product (GDP) growing by 3.5 percent year-on-year, while diamond production also increased sharply in the second quarter.
Acting President and Finance Minister Ndaba Gaolathe said the recovery was encouraging but cautioned that the country’s long-term economic growth could not continue to rely heavily on diamonds.
Speaking at the Finance and Investment Pitso in Gaborone, Gaolathe said Botswana was entering a phase where mobilising capital and directing it towards productive economic activity had become increasingly important.
“For much of our modern economic history, Botswana’s fiscal challenge was how wisely to steward the revenues we earned. The next phase is different. We must become equally good at mobilising capital and putting it to productive use,” he said.
He said infrastructure and industrial development required capital, adding that the weakness in the global diamond market had made economic diversification more urgent. Botswana’s economy contracted by 2.8 percent in 2024 and a further 0.7 percent in 2025, according to Gaolathe, following the weakening of the global diamond market.
“There are signs of recovery. The economy grew 3.5% year-on-year in the first quarter of 2026 while diamond production rose sharply in the second quarter,” he said.
However, he stressed that the composition of the recovery remained important, arguing that Botswana’s long-term economic strength could not depend on the recovery of a single commodity.
At the centre of Government’s diversification efforts is the Botswana Economic Transformation Programme (BETP), which Gaolathe said was designed to accelerate economic transformation by creating opportunities for private-sector participation.
The programme targets sectors including agriculture, manufacturing, tourism and financial services, as well as other high-potential areas.
Gaolathe said the Government’s priorities for 2026/27, as reflected in National Development Plan 12, also focus on human capital, infrastructure, private-sector-led export growth and digital transformation.
He said these priorities were intended to support diversification through productive infrastructure, competitive businesses and improved access to technology.
The recovery comes against continued fiscal pressures, with declining diamond revenues contributing to structural budget deficits and rising public debt.
Gaolathe said the original 2026/27 budget projected a deficit of P26.35 billion, equivalent to 8.9 percent of GDP. However, a preliminary revised outlook prepared by the Ministry of Finance in September 2026 now estimates the deficit at P9.26 billion, or 3.1 percent of GDP.
The revision was attributed partly to an upward revision of P8.1 billion in total revenue following higher-than-anticipated Bank of Botswana revenue.
As of June 2026, Government had recorded a budget surplus of P2.51 billion, equivalent to 0.85 percent of GDP.
Despite the improvement, Gaolathe said Government would continue with fiscal consolidation, domestic revenue mobilisation and expenditure restraint.
He said ministries, departments and agencies had implemented measures to reduce non-essential expenditure, while reforms were being pursued to strengthen tax administration and broaden revenue mobilisation.
Recent tax legislation covering VAT, income tax, tax administration and customs is estimated to generate an additional P2.47 billion in annual revenue.
Gaolathe also highlighted the development of Botswana’s domestic capital market, noting that Parliament had approved an increase in the Government bond issuance programme ceiling from P55 billion to P85 billion.
He clarified that the P85 billion figure represented an authorised programme ceiling rather than a borrowing target, with actual issuance to depend on Government’s financing requirements, debt sustainability considerations and prevailing market conditions.
He said Government would continue working with the Bank of Botswana and market participants to improve coordination, transparency and predictability in securities issuance while addressing constraints affecting liquidity and private-sector financing.
The Finance and Investment Pitso identified liquidity and funding, investor confidence, financing the productive economy, market coordination and understanding market dynamics as key priorities.
Gaolathe said Botswana’s next phase of economic development would require fiscal discipline, diversification and improved access to capital to progress together.
“Capital will move where confidence gives it reason to move. Our work is to earn the confidence and turn it into productive investment in and for Botswana,” he said.
