Business

Botswana secures $200m OPEC Fund loan

Mbongeni Mguni | Monday June 30, 2025 09:50

The OPEC Fund, a regular financier to the country’s public and private sector, has approved a $200 million (P2.7 billion) loan to government, a deal sealed during Vice President Ndaba Gaolathe’s recent engagement in Austria.
 
The OPEC Fund, a regular financier to the country’s public and private sector, has approved a $200 million (P2.7 billion) loan to government, a deal sealed during Vice President Ndaba Gaolathe’s recent engagement in Austria.

Gaolathe, who is also the Finance Minister, attended the OPEC Fund’s Development Forum earlier this month as part of his engagements with investors and funding partners.

A statement released by the OPEC Fund says the loan complements a package from the African Development Bank which approved $304 million in funding for Botswana in April.

“A $200 million policy-based loan will co-finance the Governance and Economic Resilience Support Programme alongside the African Development Bank. “The programme is designed to enhance fiscal sustainability, strengthen governance frameworks and improve economic resilience,” reads the OPEC Fund statement.

Whilst in Austria, Gaolathe was also due to sign a Country Partnership Framework with the OPEC Fund, comprising a four-year roadmap (2025–2029) for cooperation in priority sectors including energy, infrastructure, and innovation.

The OPEC Fund said it had finalised a country partnership agreement with Botswana to “support infrastructure, renewable energy, innovation and digital transformation, as well as private sector export-led growth over the next three years”.

No details of the funding or assistance agreed under the framework have been made public as yet, whilst more information on the tenure or interest rates associated with the policy-based loan has not been provided thus far.

A policy loan is one that requires the borrower to meet and comply with certain agreed policy actions as part of the funding.

Under the Governance and Economic Resilience Support Programme (GERSP) with the AfDB, conditions required prior to and after the loan disbursement include tighter fiscal management and plugging of tax leakages, as well as the development of a digital procurement system.

The AfDB and government agreed on these conditions as well as others that include greater private sector participation, enhanced environment sustainability and impact on women and the youth.

“The overarching development objective of GERSP is to support economic governance and inclusive growth through improved fiscal performance and greater private sector participation in the economy,” AfDB documents published this week show. “Importantly, the bank’s support will enable the country to create the fiscal space needed for targeted investments that will foster economic diversification, private sector development, and job creation for the youth. “Measures that deepen trade and investment facilitation and promote SMEs growth will also enhance economic revitalisation and advance the country’s economic inclusivity agenda, for the benefit of youth, women, and other disadvantaged groups.”

The OPEC Fund loan is one of two the Finance ministry revealed it was pursuing recently. The other is a World Bank facility whose quantum or progress has not been made public.

The country is facing a deficit expected to be deeper than the P22.12 billion originally forecast in the February budget speech. Authorities are banking on enhanced public finance efficiencies and the possible rebound of diamonds later this year to ease the shortfall.

In the meantime, the Finance ministry has reached the statutory ceiling of its domestic debt issuances and is now looking externally for the funding required to plug the deficit.