Botswana’s economy has emerged from two years of recession, but economists warn the recovery will remain fragile unless government accelerates long-delayed reforms, reduces borrowing and tackles the country’s heavy dependence on diamonds.
The latest Econsult Botswana Review says the economy is sending ‘mixed signals’, with GDP returning to positive territory while inflation, weak diamond exports and high borrowing costs continue to weigh on businesses and households. ‘The Botswana economy continues to send mixed signals,’ economist Keith Jefferis writes in the quarterly review.
The economy grew by just 0.2 percent in the first quarter of 2026, ending successive contractions recorded in 2024 and 2025. However, mining output still declined 9.6 percent, despite stronger performances from copper and soda ash producers. The report argues Botswana’s biggest challenge is no longer simply recovering from the diamond slump, but transforming an economy still heavily dependent on a commodity facing growing competition from synthetic stones and weak global prices.
Although diamond production rose 4.7 percent during the first quarter, exports between January and May fell 29 percent, forcing producers to stockpile unsold stones. Overall exports dropped 17 percent in the first five months of the year, widening Botswana’s trade deficit to P12.8 billion. One encouraging sign, however, was a 16 percent increase in non-diamond exports, driven by stronger copper and manufactured exports, suggesting diversification efforts are beginning to gain traction.
Households have meanwhile been squeezed by rising prices. Annual inflation climbed from 4.2 percent in March to 10.7 percent in June, largely because of higher global oil prices linked to conflict in the Middle East. Econsult expects the spike to ease following July fuel price cuts. ‘We expect Botswana inflation to fall from current levels in the coming months,’ the report says, forecasting inflation of around 8 percent by year-end.
Businesses face another hurdle: expensive credit. Despite ample liquidity in the banking sector, lending has slowed sharply as high interest rates and government borrowing crowd private firms out of the credit market.
‘Government borrowing to finance large budget deficits is crowding out the private sector from the credit market,’ the report says, noting lending to businesses and households has turned negative for the first time in three decades.
Government finances have improved, helped by a P7.3 billion dividend from the Bank of Botswana, although public debt still rose from 29 percent to 34 percent of GDP last year. Econsult expects the economy to grow between 2.5 percent and 4.5 percent this year as Debswana increases production. But Jefferis says lasting growth depends on faster implementation of the Botswana Economic Transformation Plan (BETP).
‘The BETP is an admirable programme,’ the report concludes, ‘but would benefit from better reporting on its progress.’ It adds that reforms, including privatisation and improving governance of state-owned enterprises, ‘need to be accelerated.’