The International Monetary Fund (IMF) has revised Botswana's economic growth in 2024 to 1%. Botswana's economic growth in 2023 was 2.7%.
According to the IMF, the deceleration will be caused by a sharp decline in diamond trading and mining activities was the main contributor to the slowdown, as global demand for rough diamonds decreased. However, in the medium term, growth is expected to converge towards 4%, as diamond mining recovers.
“The current account deficit is projected to widen in 2024 given weak diamond exports, followed by a rebound next year. The rebound is predicated on a recovery in the diamond market and continued elevated customs union transfers," said Luc Eyraud, Division Chief in the IMF African Department and Mission Chief for the Republic of Botswana.
“Inflation has remained below the ceiling of Bank of Botswana’s (BoB) objective range since spring 2023. After peaking at 14.6% in August 2022, inflation declined rapidly, mainly as a result of falling oil prices. The BoB has cut its policy rate twice by a cumulative 50 basis points since December 2023, following the 151 basis points increase that took place during 2022."
“On the budget side, there was significant fiscal relaxation in FY2023, mostly due to a decline in mineral revenues and higher capital spending. The fiscal position was loosened from a budget balance in FY2022 to an estimated 4.7% of GDP deficit in FY2023. Public debt remains low (20% of GDP), but government deposits at the central bank have been significantly depleted."
“The fiscal deficit is projected to widen further to 6% of GDP in FY2024, reflecting a further decline in mineral revenues and higher capital expenditure. Medium-term consolidation, in line with the authorities’ plan to achieve a fiscal surplus by FY2026, is critical to stop the depletion of financial buffers, build resilience against shocks, and preserve fiscal sustainability."
“The financial sector remains sound and stable despite the economic downturn. Faster implementation of 2023 Financial Sector Assessment Program recommendations and operationalization of new regulations and laws will further reduce financial sector risks."
To hasten economic growth, the IMF mission recommended a fundamental shift towards greater private sector participation, a more diversified export base, and a more efficient public sector. In terms of policies, the mission recommended reform of state-owned enterprises, improved infrastructure for doing business (internet, energy, logistics), and trade facilitation measures.