Rising debt costs, stagnant wages and living expenses are squeezing Botswana households as defaults rise and borrowing becomes increasingly expensive
BONGANI MALUNGA
Botswana households are spending nearly two-thirds of their income servicing debt as rising borrowing costs, stagnant wages and persistent living expenses tighten the financial squeeze on consumers.
The findings are contained in the Bank of Botswana’s 2025/26 Household Indebtedness Survey Report, released on 22 October 2026, which shows that the household debt-service-to-income ratio remained elevated at 63 percent in 2025.
This means debt repayments continued to absorb a significant share of borrowers’ earnings at a time when households were already grappling with pressure on disposable incomes.
INCREASED HOUSEHOLD DEBT
Total household debt increased by 2.5 percent from P68.6 billion in December 2024 to P70.3 billion in December 2025, equivalent to 26.1 percent of Botswana’s gross domestic product. While the central bank does not yet regard household debt as a systemic financial stability threat, it cautioned that borrowers are becoming increasingly vulnerable to income and cost-of-living shocks.
“Debt-To-Income ratios for both males and females increased, indicating that household leverage has risen relative to income and reducing borrowers’ resilience to income, interest rate and cost-of-living shocks,” the Bank stated.
Average debt-to-income ratios rose sharply, for male borrowers, the ratio increased from 38.4 percent in 2024 to 50.8 percent, while the corresponding ratio for women climbed from 37.7 percent to 50.7 percent. Borrowers aged between 40 and 49 years recorded the highest average ratio at 52.7 percent.
REPAYMENT STRESS
According to the report, signs of repayment stress are also emerging. The average default rate recorded by banks more than doubled from 2 percent in 2024 to 4.7 percent in 2025, although banking-sector non-performing loans remained relatively stable.
The Bank said lenders were preparing for further pressure, noting that “most banks anticipate a mild deterioration in household loan performance in 2026, attributable to a subdued economic outlook and inflationary pressures.”
Borrowing also became considerably more expensive during 2025 as average interest rates on unsecured loans rose from 12.9 percent to 18.3 percent, while credit-card rates jumped from 19.8 percent to 27.9 percent. Mortgage rates increased from 8.5 percent to 10.6 percent, while motor vehicle financing rose from 9.9 percent to 12.5 percent.
ADDED PRESSURE
Despite the increased cost of credit, the Bank expects households to continue borrowing partly because of pressure on everyday finances. “Persistent cost of living pressures are expected to sustain demand for credit as consumers seek financing to supplement their disposable income and smooth consumption,” the report states.
The finding suggests that household credit demand is increasingly being sustained by the need to protect spending power as incomes struggle to keep pace with financial obligations.