A diamond-led rebound may restore modest growth, but the World Bank warns that only structural reform can meaningfully reduce poverty and unemployment.
GAZETTE REPORTER
Botswana’s economy is expected to stage a modest recovery over the next two to three years, largely on the back of a rebound in diamond production from historically low levels, according to the World Bank Group.
Its report, Seizing the Moment: How Botswana Can Turn Crisis Into Opportunity, projects economic growth of about 3.2 percent in 2026, supported by a significant recovery in diamond production. However, production is expected to remain below levels recorded over the past decade.
Limited Rebound
The World Bank cautions that “momentum in the non-mining economy is likely to remain subdued,” citing fiscal adjustment, weak private investment and a challenging business environment.
Over the medium term, growth is projected to average around 3 percent, reflecting gradual policy improvements and investment in renewable energy and base-metal mining.
Even so, the report says “growth at this pace would be insufficient to significantly reduce poverty or unemployment.”
Fiscal Pressure
The report warns that inflation risks remain tilted to the upside because of higher fuel and transport costs, before easing back towards the target range in 2027.
Botswana’s fiscal position also remains under pressure.
“The deficit is expected to remain large in FY2026/27,” the report states, pointing to higher development spending and significant one-off expenditures.
It adds that financing constraints are becoming increasingly important and warns that “budget execution will increasingly depend on access to affordable external financing.”
Without such financing, the World Bank says liquidity constraints could lead to the under-execution of government spending, “an outcome already observed in the recent past.”
Two Paths
According to the report, Botswana now faces two distinct economic paths.
The first is to maintain the current model, make only marginal adjustments and continue relying on diamonds as the country’s main export. The World Bank warns that this approach “carries significant risks,” leaving the economy exposed to commodity shocks while producing limited gains in productivity, employment and poverty reduction.
The alternative is to transform the economy by reducing the state’s footprint and promoting private sector-led growth through diversification.
Reform Agenda
The report says this approach is at the centre of the Botswana Economic Transformation Programme adopted in 2025.
It identifies four priorities: restoring fiscal stability through a more efficient state, promoting a dynamic private sector, investing in people, and harnessing natural capital through renewable energy, improved water security and climate-smart rural livelihoods.
The World Bank concludes that these measures could place Botswana on “a more prosperous, inclusive, and resilient development trajectory.”