For the second year running, Vice President and Finance Minister Ndaba Gaolathe’s budget is facing a crisis of confidence after international institutions once again projected economic growth far below treasury forecasts, raising questions about whether government is budgeting on optimism rather than economic reality.
The latest blow comes from the African Development Bank (AfDB) whose African Economic Outlook 2026 report projects Botswana’s economy will grow by just 1.2 percent in 2026 before improving to 3.5 percent in 2027. The forecast stands in sharp contrast to the far more optimistic outlook presented by Gaolathe in his February budget speech, where he projected economic growth of 3.1 percent.
The gap is more than a statistical disagreement. It raises uncomfortable questions about whether the country’s chief economic manager is underestimating the depth of Botswana’s economic crisis or overselling the prospects of a recovery that remains stubbornly out of reach.
The caution from the AfDB adds to a growing chorus of international institutions warning that Botswana’s economic recovery will be weaker and slower than government projections suggest. The World Bank reported that GDP growth is projected to reach 2.7percent in 2026 and average 3.2 percent in 2027-28. 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. Poverty, at the US$3 per day (2021 PPP) line, is projected to remain broadly unchanged at19.7percent(around 513,000 people) in 2026.
Rating agency SandP Global was equally pessimistic when it downgraded Botswana’s sovereign credit rating earlier this year, forecasting growth of only 2.5 percent in 2026 while warning that structural problems in the global diamond market remain far from resolved.
Fitch Solutions has also revised down its expectations for Botswana, forecasting growth of just 2.3 percent for 2026 and describing any recovery as narrow, fragile and heavily dependent on a turnaround in mining rather than broad-based economic expansion.
Taken together, the forecasts paint a troubling picture. Virtually every major external institution sees a weaker economy than the one being projected by the Ministry of Finance.
More significantly, this is becoming a pattern. Last year, Treasury projections were similarly oversold the recovery narrative. During his maiden budget speech in 2025, Gaolathe optimistically forecasted a 3.3% economic expansion for the year, anticipating a strong rebound in diamond demand. However, the government was forced to revise its projections dramatically downward to nearly zero growth by mid-year.
By the end of the year, the ministry had to adjust the forecast further into negative territory, ultimately projecting an overall economic contraction of almost 1% (-0.9%) for 2025.
In its African Economic Outlook 2026 report, the AfDB thinks the economy will come out of recession, but warns that the recovery depends a lot on things Botswana cannot control, especially the global diamond market.
‘The main downside risk remains uncertainty in the diamond market and the Middle East conflict,’ the report says, warning that outside shocks could easily disrupt Botswana’s recovery.
The bank says growth will be helped by new investments in mining and more activity in other sectors, especially services. There will also be investments in agro-processing, digital technology, renewable energy, and tourism.
The AfDB expects Botswana’s fiscal deficit to reach 8.9 percent of GDP in 2026, then drop a little to 8.0 percent in 2027. The growing budget gap will likely be covered by borrowing, which puts more strain on public finances as borrowing costs go up.
Inflation is expected to average 6.2 percent in 2026, then fall to 4.7 percent in 2027 because of strict monetary policy.
The current account deficit is expected to grow to 6.4 percent of GDP next year, then shrink to 4.5 percent in 2027. This shows ongoing problems in external trade, even though diamond exports are expected to recover.
The report also questions whether Botswana can fund its development goals.
The AfDB says Botswana struggles to raise large amounts of development money because of its small tax base, heavy reliance on minerals, limited capital markets, and higher borrowing costs. Recent credit rating downgrades have made it even harder and more expensive for Botswana to get long-term loans, even though its public debt is not very high.
To improve its finances, the bank suggests Botswana should widen its tax base, collect more non-tax revenue, cut down on illegal financial flows, and make public investment more efficient.
The AfDB also urges the government to develop local capital markets, get pension funds involved in infrastructure projects, and speed up reforms of state-owned companies.
Besides financial issues, the report also highlights serious social problems.
About 17 percent of people in Botswana still live in extreme poverty, and unemployment is high at 27.6 percent. Youth unemployment is even worse at 38.2 percent. The bank says slow growth in real GDP per person has held back inclusive development, even though Botswana has a fairly high Human Development Index score of 0.731. The report suggests that while leaders expect growth to return, many people in Botswana may still face tough times for years.