IMF projects 1% contraction for Botswana
Mbongeni Mguni | Monday October 6, 2025 06:00
In April, the IMF forecast a 0.4 percent contraction, again based on the performance of diamonds. The Finance Ministry, in its last projections, said it expects the economy to contract by 0.4 percent.
In a statement following meetings with local fiscal and monetary authorities, as well as major private sector entities, the IMF said its outlook was based not only on the weak diamond performance, but the fact that this was impacting broader government revenues.
“The economy is expected to contract by about one percent this year, as historically high stocks of diamonds restrain new mining activity, and as activity in other sectors slows down as the government reduces its spending,” researchers said. “Over the medium term, if the authorities implement ambitious reforms to ensure fiscal and external sustainability and diversify the economy, growth could recover gradually to more than four percent.”
The reforms, researchers said, include accelerating growth and job creation through a fundamental shift towards greater private sector participation, a more diversified export base, and a more efficient public sector.
The IMF said the initiatives launched by the government aimed at reducing wasteful public spending, better prioritising public investment, and promoting private sector-led investment, including as part of the Botswana Economic Transformation Programme, were welcome.
However, the researchers again repeated the IMF’s long-held views of the structural reforms required to reset the economy’s trajectory.
“To complement these initiatives, it will be important to advance reforms aimed at enhancing domestic revenue mobilisation; streamlining the wage bill, better targeting social assistance programmes, and strengthening the management of state-owned enterprises,” the IMF stated.
Researchers said it was also critical that reforms be accelerated to create a more conducive business environment, with an emphasis on reducing red tape and promoting financial deepening.
The IMF has repeatedly suggested reforms such as streamlining the wage bill and better targeting social assistance programmes, in a number of its annual meetings with government.
Vice President and Finance minister, Ndaba Gaolathe, has said an audit of the civil service payroll is underway, with a view to improved wage bill management. Speaking at an investor roadshow early last month, he added that other systems were also being tightened.
“Our first round of cost containment measures, which include the centralisation of government purchase orders, have revealed widespread systemic gross mismanagement of control measures across ministries and across departments and across agencies. “Around the clock, our teams are ensuring that every Pula is spent, or every Pula spent goes strictly towards essential goods and services,” he said.
Gaolathe said more details on the introduction of greater efficiency in budgeting and public finance management would be provided in the upcoming mid-term budget review statement.
The statement, which will be the inaugural one, is expected once Parliament reconvenes and will cover the performance of the fiscus and economy for the half year to September 30, as well as revisions of spending and revenue.