GIA plummets as deficit now seen at P29bn
Lewanika Timothy | Monday May 12, 2025 09:07


With diamonds, the mainstay sector of Botswana’s economy, remaining protracted with no clear recovery in sight, government faces dwindling revenues that is burning up savings held by the Bank of Botswana (BoB) known as the GIA.
Government has been forced to draw down heavily on the GIA to meet its budgetary requirements, whilst also failing to replenish the account due to low mineral sales.
Researchers at local economic consultancy firm, Econsult, this week sombrely pointed out the dire financial crisis government faces in the 2025–2026 financial year. The researchers, led by former BoB deputy governor and prominent economist, Keith Jefferis, expect the budget deficit to reach P29 billion this year, above government’s own forecasts of P22 billion, whilst the GIA they believe could drop to a mere P250 million.
“The Government Investment Account fell to a paltry P250 million in December 2024, down from P8.6 billion a year earlier. “Government has faced severe challenges in financing a deficit of this magnitude, and had to draw down the final savings balances that underpinned government liquidity in the past,” researchers noted.
The GIA, which is managed by the BoB and represents government’s share of the Pula Fund, is an asset generally unknown by most outside the finance and banking sector.
Government often dips into the GIA to fund various needs such as the 2016 Economic Stimulus Plan and budget shortfalls. Frequent withdrawals from the Pula Fund are also made to support the country’s import bill.
With the GIA at the bottom of the barrel, government will have to finance its budget deficit through borrowing domestically and internationally. Researchers at Econsult, however, cautioned that this may edge Botswana closer to its statutory debt limits, which are set at 40% of Gross Domestic Product (GDP).
“Now that the GIA has been depleted, deficits have to be financed entirely by borrowing; the result is a rapid increase in the level of public debt that is set to hit the statutory debt limit within the next one or two years,” researchers noted Botswana's budget deficit, which is the shortfall between government revenue and government expenditure for any financial year has been growing over the years mainly marked by declining mineral revenues. For the financial year 2023–2024 the deficit was P8.7 billion, but in the following year the numbers reached an all-time high in absolute terms of P24.8 billion marked by the expansionary P102 billion budget and falling revenues associated with the diamond slump.
To try and raise as much funds from the local capital market, government attempted to introduce a new borrowing instrument in the form of Inflation-Linked Bonds (ILB) which however failed to reach the capital raise target in the debut listing earlier this year. Econsult researchers apportioned this to a poor product-market fit which was underpinned by Botswana’s low inflationary climate in the first quarter.
“This reflects a number of factors, including the current low rate of inflation, a lack of financial market liquidity due to the high level of conventional bond issuance, and the very short notice of the auction given to banks and institutions, which left no time for them to mobilise resources to invest in ILBs through the liquidation of other assets,” researchers noted.
The Finance ministry also recently secured a P3 billion loan from the Botswana Public Officers Pension Fund (BPOPF), its first ever direct financing from the pension fund, as it raced to settle outstanding supplier invoices ahead of the start of the new financial year.
Traditionally, the BPOPF participates in government’s domestic debt programme indirectly through the use of intermediaries such as asset managers and their commercial banks. The P55 billion debt programme, which features monthly auctions of government bonds and treasury bills, is open exclusively to primary dealers who are commercial banks.
With the debt trajectory, researchers warn that government may soon hit the statutory limit of 40% of GDP within the next two years. Moody’s credit rating agency estimates that the statutory limit will be reached more quickly by March 2026. It is possible that the statutory limit on domestic borrowing and guarantees of 20% of GDP will be reached in the next 12 months.