Gov’t to lift borrowing limits as deficits persist
Lewanika Timothy - Mbongeni Mguni | Monday February 16, 2026 09:17
For the financial year 2026–2027, government is projecting a weaker fiscal position with P18.6 billion of the forecast P26.4 billion still unfinanced. Draft estimates released this week indicate that the Finance ministry plans to tap the domestic capital market for P14.1 billion in net borrowings for the deficit.
The external market, priced in US dollars and carrying an exchange rate risk, will be approached for about P12.5 billion in net borrowings.
That level of borrowing and the already swollen size of existing public debt, including guarantees, mean that government is set to breach the 40% of GDP fiscal limit for debt.
Presenting the 2026–2027 Budget Speech on Monday, Finance Minister Ndaba Gaolathe estimated that the total public debt would likely end the next financial year at 44.66% of GDP.
“With the Government Investment Account at critically low levels, debt levels are expected to increase significantly in order to finance the projected deficit,” he told legislators. “This additional financing would raise total public debt, including guarantees, to an estimated 44.66% of GDP by the end of the 2026–2027 financial year, thereby requiring a recalibration of the statutory debt ceiling currently set at 40% of GDP.”
The request would be a historic first for a country that has traditionally powered its development by shying away from debt and using capital excesses from revenue sales as a budget cushion.
Public debt has been on the rise since the pandemic years, when government significantly ran down its savings in the Government Investment Account, whilst maintaining high spending at a time when key mineral revenues had been in a longer downward slide dating back to the dawn of the last decade.
The prolonged diamond downturn, which began in the third quarter of 2023, has also exposed the country’s finances, with Gaolathe forecasting that mineral revenues would be the fourth largest contributor of revenues in the upcoming financial year, from their previous dominant position.
Raising the statutory debt ceiling would give Botswana short-term budgetary relief by legally accommodating the higher borrowing required to finance a large deficit without drastic cuts to essential services or development programmes. However, higher debt ceilings jolt credibility and could see Botswana’s investment-grade sovereign credit ratings being downgraded, which could, in turn, lead to higher costs of borrowing.
Regionally, Botswana’s current debt ceiling of 40% to GDP is modest compared with the high debt burdens in some neighbouring economies. South Africa’s public debt stands at over 70% of GDP, well above typical SADC benchmarks and far above Botswana’s limit, reflecting prolonged fiscal deficits and borrowing to support social spending and infrastructure.
Namibia’s debt is similarly elevated at about 70% of GDP, well above regional convergence targets.
Speaking during the First National Bank Botswana budget review seminar this week, the Finance ministry’s secretary of macroeconomic and financial policy, Sayed Timuno, said the country could be headed for a fiscal cliff if measures were not taken to finance the deficit, whilst also ensuring sustainability and prudence.
Timuno hinted that the ministry was considering raising the limits to as much as 60% or to some other regional benchmark.
Meanwhile, Gaolathe presented a budget which proposes record spending of P103.58 billion for the 2026–2027 financial year, set against revenues of P77.2 billion.
The projected deficit of 8.9 percent of GDP continues the persistent structural imbalance between revenue and expenditure that has been seen since the 2017–2018 financial year. Total revenues and grants for 2026–2027 are forecast at P77.22 billion, while total expenditure and net lending are projected at P103.58 billion.
SACU receipts are expected to be the largest single revenue stream at P26.79 billion, followed by non-mineral income tax at P19.76 billion. However, mineral revenues, which traditionally anchor the country’s fiscal framework, are projected to remain subdued amid continued weakness in the global diamond market.
Gaolathe’s spending plan includes an 11% increase in the allocation for wages, salaries and allowances, as well as nominally flat expenses associated with grants and subventions for local authorities and parastatals. The estimates also indicate a 2.3 percent increase in the development budget.
Draft estimates released by the Finance ministry show increases in the recurrent budgets of most ministries and departments for the upcoming financial year, which starts on April 1.