Botswana economy, June till August 2025

Catching up with the economy

Author

Boago Sephutho
August 19, 2025

Good morning 😃☀️🌞, yesterday I took a little break, I’m trying to get my head together, and so far so good with the interviewees of ATAP Sundays as I prepare to bring in issue 2 by end of the month. But anyway, let’s get into it!

Here’s the latest read on Botswana’s economy as of mid-August 2025:

Diamond Market Under Pressure

  • Debswana, the main engine of Botswana’s diamond economy (accounting for ~30% of government revenue and 75% of foreign exchange), significantly cut production due to weak global demand. In 2024, output fell 27% to 17.93 million carats, and in 2025 the company plans to further reduce it to 15 million carats. Operations at several mines and plants have been paused to contain costs, though no forced layoffs are planned  .

  • Botswana is seeking to gain control of De Beers, aiming for a controlling stake amid Anglo American’s planned sale of its 85% holding. The government argues that the process has lacked transparency, and this move could reshape the diamond sector’s future  .

  • Earlier in February, Botswana secured a 10-year diamond sales agreement with De Beers. This will increase the government’s share of diamond sales via Debswana from 25% to 30% in the first five years, then 40% in the next five, with an option to extend—for a potential eventual 50-50 sharing—while extending De Beers’ mining license until 2054  .

GDP, Growth, and Outlook

  • The economy contracted sharply: about –3% in 2024, with the IMF forecasting an additional –0.4% contraction for 2025  .

  • Originally, the government budget had expected growth of 3.3%, but ongoing weak diamond demand forced a downward revision to near-zero growth and an anticipated widening budget deficit beyond the earlier projection of 7.5% of GDP  .

  • Recent data show the first quarter of 2025 GDP declined ~0.3% year-over-year, marking the fifth consecutive quarter of contraction. Key weak sectors include mining (–7.7%), agriculture/water/electricity, and diamond trading (–36.2%)  .

  • Development institutions like the IMF and S&P agree: the outlook has been downgraded. S&P Global revised Botswana’s economic outlook to negative, maintaining a ‘BBB+’ sovereign rating but warning of limited fiscal leeway and rising debt  .

Inflation & Monetary Policy

  • Inflation is currently subdued, well below regional averages.

    • June 2025: headline inflation edged up to 2.0%, still below the Bank of Botswana’s 3–6% target range  .

    • May 2025: inflation had slipped to 1.9%, driven by lower prices in transport, housing, and food items.

  • The central bank has kept interest rates low (around 1.9–2.4%), aiming to stimulate activity amid sluggish demand  .

Fiscal Health, Trade & Diversification

  • Deficits remain high: IMF and local sources report fiscal shortfalls exceeding 7–9% of GDP for 2024–25  .

  • Botswana continues running trade deficits (e.g. BWP 37 billion in 2024) and a current account gap, though reserves remain relatively robust (7–8 months of import cover)  .

  • Long-term concerns about economic reliance on diamonds persist. Efforts underway include:

    • Exploring non-diamond exports (e.g. copper, mining of other minerals),

    • Investing in renewable energy infrastructure (like the 120 MW Mmadinare solar power project, expected online in late 2025)  ,

    • Potential rail and port connectivity expansions (e.g. Ponta Techobanine corridor and Mmamabula–Lephalale link) to enhance trade access  .

Challenges like high unemployment (over 23%), youth joblessness, and inequality remain pressing.

Summary Snapshot

Category

Current Reality (Mid-2025)

GDP Growth

Deep contraction (~–3% in 2024; –0.4% forecast for 2025); slow recovery expected

Diamonds

Market downturn; production cuts; new sales deal; push to control De Beers

Inflation

Low (~2%), below target – positive for consumers, tough for revenue goals

Fiscal Health

Large deficits (7–9% of GDP); debt moderate; foreign reserves stable

Diversification

Active policy push into energy, minerals, infrastructure

Outlook

Clouded by external shocks; rebound tied to diamond demand recovery

Botswana’s economy in 2025 is navigating a challenging phase:

  • Heavily stressed by the global diamond slump, triggering substantial contraction in GDP and revenue.

  • Policy response is multifaceted: negotiating diamond sector control, managing inflation, and investing in alternative growth sectors.

  • Diversification and infrastructure investment are essential, but benefits will take time to materialize.

Sources: