By Douglas Rasbash, Gazette Correspondent
A year into the new government, the country closes 2025 with deeper structural pressures than anticipated — from shrinking minerals and strained fiscal space to rising climate vulnerability and a misaligned currency.
As 2025 draws to a close, Botswana finds itself confronting a reality sharper than the promises that opened the year. The first full year of the new administration has revealed an economy shifting beneath its feet — diamonds fading, revenues tightening, inflation turning, and climate impacts accelerating. Far from a passing downturn, the data suggests a long-term transformation now underway.
Recession Turns From Cycle to Structure
Botswana is now six quarters deep into recession — its longest since the early 1990s — signalling a transition from temporary weakness to structural change. With diamond production projected to fall by more than 40% from peak levels and non-mining sectors still sluggish, the assumptions that once underpinned NDP12 no longer hold.
Fiscal Pressures Mount as Buffers Shrink
Inflation remained subdued in July and August before rising sharply in September, signalling a change in price direction. Meanwhile, the P64 billion NDP12 funding gap and rising domestic borrowing have narrowed fiscal space significantly, turning 2025 into one of Botswana’s tightest budgeting years in recent memory.
Credit Downgrades Signal a Loss of Confidence
S&P and Moody’s both downgraded Botswana during Q3 and Q4, citing persistent recession, shrinking diamond revenue, and weak project execution. Under-subscription of government bond auctions underlined investor caution and the rising cost of sovereign borrowing.
Pula Holds Steady, But Fundamentals Don’t
Despite trading at 14.8–15.2/USD after the July adjustment, the Pula’s stability is more engineered than organic. With reserves falling from historical highs and productivity weakening, the currency’s alignment with long-term economic needs is now in question.
Markets Boom While the Economy Shrinks
The Botswana Stock Exchange recorded its highest-ever turnover as pension funds shifted to local assets. Yet government bond demand weakened sharply, revealing a market that is bullish on private assets but cautious on sovereign risk.
Private Sector Shifts to Energy, Water, and Data
Rather than collapsing, the private sector is redirecting investment into solar, hybrid energy systems, warehousing, logistics, and digital infrastructure. Meanwhile, speculative megaproject proposals have increased, creating emerging governance risks.
Green Economy Emerges as Botswana’s New Frontier
Investment momentum is rising in climate-aligned sectors: solar energy, battery storage, water reuse, EV infrastructure, and carbon credits. Yet global climate finance is increasingly tied to credibility and measurable delivery.
Climate Shocks Become a Macro-Economic Threat
Drought, water stress, rising temperatures, and surging electricity demand have now crossed into the realm of sovereign risk. Agricultural losses alone can wipe out 1–2% of GDP in bad years.
A New Economic Era Begins
The third quarter of 2025 confirms a shifting economic model: diamonds are waning, revenues tightening, and resilience sectors — energy, water, digital systems, climate adaptation — rising in importance. Execution, not planning, will define the next decade.