Botswana is located at the center of Southern Africa, positioned between South Africa, Namibia, Zambia, and Zimbabwe˳ One of the world’s poorest countries at independence in 1966, it rapidly became one of the fastest-growing economies˳ Significant mineral (diamond) wealth, robust institutions, prudent economic management, and a relatively small population of about 2˳5 million (2022), have made it an upper-middle-income country with an aspiration of becoming a high-income country˳
Political Context
Botswana’s stable political environment includes a multi-party democratic tradition, with general elections held every five years˳ The ruling Botswana Democratic Party (BDP) has been in power since independence˳ In October 2019, Botswana held its 11th general elections, with President Mokgweetsi Eric Masisi assuming the presidency˳ The next election is scheduled for October 2024˳
Economic Overview
Botswana’s macroeconomic policy framework is anchored in prudent macroeconomic policies and robust economic institutions, particularly around managing diamond revenue˳ It has contributed to a long period of positive economic growth˳ But Botswana’s reliance on diamonds and a public sector-driven model have made the economy vulnerable to external shocks, as diamonds contribute over 90% of total exports and are a major source of fiscal revenues˳ The latest example was the impact of COVID-19 in 2020 when the economy contracted by 8˳7%˳ But it has since rebounded strongly supported by the easing of the pandemic and favorable external demand for diamonds˳ Inequality in Botswana remains among the highest in the world, job creation lags, and unemployment is structurally high at 25˳4% (end of 2022)˳
The World Bank projects economic growth to reach an estimated 6˳5% in 2022˳ Amidst waning global growth and the projected stabilization of diamond prices, growth is expected to moderate to about 4˳0% in 2023, driven by the diamond sector and the non-mining sector largely through services as increments in public sector wages drive demand in the retail sector˳
Inflation remains elevated˳ It increased sharply to a decade-high of 12˳2% in 2022 (from 6˳7% in 2021) triggered by an upward adjustment of administered prices, a modest recovery in domestic demand, and higher international food and fuel prices emanating from supply chain shocks˳ Bank of Botswana tightened monetary policy in 2022, raising the newly introduced Monetary Policy Rate by a cumulative 151 basis points˳ It projects inflation to fall between the 3-6% objective range by the second quarter of 2024˳
Fiscal pressures are expected to remain significant amid elevated capital and current spending˳ The overall fiscal deficit narrowed to an estimated 2% of GDP in 2022 and public debt reached an estimated 20˳8% of GDP˳ The fiscal deficit is set to widen, with higher government spending to cushion households against higher inflation and protect the most vulnerable˳ Improving the efficiency of public spending and reorientating expenditures toward investment and human capital to raise productivity, create jobs, and diversify the economy by expanding the modest private sector remains key˳
Social Context
Botswana continues to face structural challenges, slow growth, and shock from the COVID-19 pandemic˳ The Botswana Multi-Topic Survey: Labour Force Module Report indicates the unemployment rate rose to 26% in 2021, with youth unemployment posing a critical challenge for the country˳ Addressing this and other challenges will require improving the quality of infrastructure (water and electricity), essential basic services (education, health, and social safety nets), and accelerating reforms to the business environment, and providing effective support for entrepreneurship and private-sector job creation˳ The World Bank’s Human Capital Index (HCI) scores Botswana at 0˳42 (2020)˳ A child born in Botswana today will be 41% as productive when he/she grows up as he/she could be if he/she enjoyed complete education and full health˳ This is slightly higher than the average for the Sub-Saharan Africa region but lower than the average for Upper Middle-Income countries˳ Education expenditure in Botswana is among the highest in the world and includes the provision of nearly universal free primary education, but it has not created a skilled workforce˳
Last Updated: Mar 28, 2023
