Botswana’s public debt rose sharply to an estimated 40.7% of GDP in 2025, up from 33.1% in 2024, as the government relied increasingly on borrowing to finance a widening fiscal deficit, according to the African Development Bank’s African Economic Outlook 2026.
The increase comes as Botswana’s economy contracted by 0.7% in 2025, following growth of 2.8% in 2024. The African Development Bank attributed the contraction largely to reduced diamond output and subdued government spending.
The fiscal deficit also widened to an estimated 9.4% of GDP in 2025, compared with 7.3% in 2024. The deterioration was linked to weak domestic revenue mobilisation, with the deficit being financed through additional borrowing.
The rising debt comes at a challenging time for Botswana, whose economy remains heavily dependent on mineral revenues, particularly diamonds. The African Development Bank warned that uncertainty in the diamond market remains one of the major downside risks to the country’s economic outlook.
The debt increase is also occurring alongside weakening external buffers. Botswana’s foreign reserves fell from US$3.5 billion at the end of 2024 to US$3.1 billion by the end of 2025, reducing import cover from 5.4 months to 4.4 months.
Despite the fiscal pressures, the country’s financial sector remains relatively resilient. Banks were reported to be well capitalised, with a capital adequacy ratio of 20%, significantly above the 12.5% regulatory requirement, while non-performing loans stood at 3.3%. Private-sector credit also grew by 5.7% during 2025.
The African Development Bank expects Botswana’s economy to recover modestly, projecting 1.2% growth in 2026 and 3.5% in 2027. The recovery is expected to be supported by renewed mining investment and stronger activity in non-mining sectors, particularly services.
However, fiscal pressures are expected to persist. The fiscal deficit is projected at 8.9% of GDP in 2026, before narrowing to 8% in 2027 as the government pursues fiscal consolidation. The deficit is still expected to be financed through borrowing.
The World Bank has similarly highlighted Botswana’s rising debt burden, noting that public debt increased from about 22% of GDP in 2023 to nearly 40% in 2025, while calling for faster reforms to diversify the economy and create jobs.
The AfDB says Botswana needs to broaden its sources of revenue and development finance to reduce pressure on government borrowing. Recommended measures include strengthening tax and non-tax revenue collection, reforming state-owned enterprises, deepening capital markets and encouraging pension funds and institutional investors to participate in infrastructure financing.
The bank also advocates greater use of public-private partnerships, blended finance, multilateral development-bank guarantees, green bonds and diaspora financing to attract private capital and support long-term investment.
The country’s social indicators add urgency to the need for stronger and more inclusive growth. The AfDB estimates that 27.6% of the labour force is unemployed, with youth unemployment reaching 38.2%, while about 17% of the population lives in extreme poverty
For Botswana, the challenge is therefore not only to contain rising debt but to ensure that borrowing translates into productive investment, economic diversification and employment.
The AfDB says the country will need sustained structural reforms and fiscal consolidation to reduce its vulnerability to diamond-market shocks and create a more resilient and inclusive economy.
