Economy shrinks amid diamond sector uncertainty

Botswana’s GDP is expected to grow by 2.7% this year, reflecting a modest recovery in diamond production after a challenging period for the sector. The landlocked country remains heavily reliant on diamonds, which account for around 80% of export earnings and a significant share of government revenue, leaving the economy vulnerable to fluctuations in global demand. According to the latest World Bank report on Botswana, the growing consumer shift towards lab-grown diamonds has had a significant impact on the country’s economy. Fiscal sustainability has come under increasing pressure as declining mineral revenues and rigid government expenditure have reduced fiscal space and contributed to a rapid rise in public debt in recent years. Botswana has enjoyed strong economic growth for much of the past four decades, but its heavy reliance on diamonds has left the economy vulnerable to shifts in global demand. After averaging growth of 6.7% between 2021 and 2023, the economy contracted by 3% in 2024 and is estimated to have shrunk by a further 0.9% in 2025 as the diamond sector came under increasing pressure. “GDP growth is projected to average 3.2% in 2027-28,” reads the World Bank report. “This outlook reflects a modest recovery in diamond sales (albeit remaining well below historical values), gradual improvements in electricity supply and an improved business climate supported by trade, financial and administrative reforms.” The country’s outlook, however, remains subject to significant downside risks. Continued uncertainty in the diamond sector could delay any recovery, while higher oil prices linked to tensions in the Middle East are expected to place further strain on the economy by pushing up inflation. Against this backdrop, President Duma Boko used a recent Botswana- South Africa business forum to acknowledge the economic challenges facing the country, including declining diamond revenues, infrastructure constraints, border inefficiencies and the slow implementation of development projects. Boko said one of government’s biggest challenges was turning plans into action and stressed that improving regional infrastructure would be critical to boosting trade, attracting investment and supporting economic diversification, which will be essential if Botswana is to reduce its dependence on diamonds. “As government, our blind spot is often one thing: the inability to implement and execute,” he said. Referring to the long-delayed Trans-Kalahari rail project linking Botswana and Namibia, Boko expressed frustration at the pace of progress. “The Trans-Kalahari has been on the cards for 12 years. People talking, technocrats meeting back and forth and talking about talking. I’m tired. I don’t want to talk about talking,” he said. Boko said discussions with Namibia’s leadership had reinforced the need to move ahead with the project. “The President of Namibia says this project must be delivered and I say the same thing. We are going to deliver it. We want it delivered this year.” LV