Growth now expected near zero, deficit set to widen
Mbongeni Mguni | Thursday June 12, 2025 12:18
The latest forecast comes as Finance ministry technocrats prepare the country’s inaugural mid-term budget, which will provide a half-year revision of the estimates provided in the February budget.
In a week in which the country was shaken by more revelations of the dire hand-to-mouth state of public finances, Finance ministry officials announced that the local economy was facing the possibility of the first ever double recession since Independence in 1966.
The economy last year contracted by three percent and was due to rebound by 3.3 percent this year, an achievement, permanent secretary Tshokologo Kganetsano, told legislators on Monday was impossible due to the prolonged diamond slump.
Kganetsano said instead growth would be near zero this year and a contraction was possible, although the extent was yet to be confirmed by the Ministry.
The PS, formerly a deputy governor at the Bank of Botswana, said the forecast deficit of about P22 billion for the 2025–2026 financial year would also be significantly revised upwards due to the added uncertainty to the diamond recovery caused by the Trump administration’s global tariffs.
“We had forecast a deficit of around P22 billion premised on collecting diamond revenues of around P17 billion but the way it is now, we are most likely to revise that figure downwards because diamonds are not selling,” he said. “The revenue forecast was made before Trump imposed tariffs around the world, therefore having a negative effect on global economic activity. “We are selling a luxury item and for those developed economies where we sell our diamonds, when their economies go down, the first thing they chop off their shopping lists are luxury items such as diamonds,” Kganetsano said.
The PS further revealed that the cash flow situation in public finances was so severe that any inflows were quickly wiped out by salaries and settlement of invoices. Suppliers and vendors to government are owed billions of pula in historical arrears and the inflows of late have failed to make a dent in the outstanding amounts, the PS said.
“We are currently experiencing a significant decline in revenue inflows resulting in massive liquidity challenges that threaten financial stability and sustainability of government business operations,” he said. “Between January and end of May, we contracted two short loans in addition to the SACU receipts which were just above P6 billion in January and just over P6 billion in April. “All those funds are gone.”
Kganetsano added: “When I was at the BoB, we could see that when the SACU funds hit the government account, they could stay for a month or so before they became depleted. “Today, the situation has changed and on January 6, just over P6 billion hit the account on a Monday and by close of business on Thursday the same week, more than 90% of that was gone, but invoices were still outstanding.”
The PS further revealed that government was facing a monthly wage bill of about P2.5 billion, while the Government Investment Account, which stores national savings, was at about P700 million.
The situation has left the country increasingly dependent on debt, whose levels for the domestic borrowings are rapidly reaching the limit of 20% of Gross Domestic Product. The situation means going forward more of government's borrowings will have to come from external financiers.