Fought in the Middle East, felt in Botswana

Lewanika Timothy | Monday April 6, 2026 06:00

Last week’s steep increase in petrol, diesel, and paraffin prices marked one of the sharpest adjustments in recent years, immediately raising the cost of transport and signaling the start of a wider inflation cycle. For an economy already navigating weak growth and declining mining output, the timing could hardly be worse.

The latest shock is a result of the escalating conflict in the Middle East, a region that anchors global oil supply. Attacks on energy infrastructure and threats to key shipping routes, particularly the Strait of Hormuz, have triggered sharp increases in crude oil prices, pushing markets into a period of heightened volatility.

The Botswana Energy Regulatory Authority (BERA) last week announced it raised the retail price of unleaded petrol 95 by P5.05 thebe per liter, diesel by P8.77 thebe, and illuminating paraffin by P1.5 thebe. The increase comes at a time when consumers are already under pressure, raising the likelihood of a broad-based rise in prices across the economy in the coming weeks. Diesel, which is a key input in public transport, logistics, and agriculture, saw the steepest adjustment, signaling immediate pressure on commuter fares and the cost of moving goods.

As a net importer of fuel, the country has no buffer against global oil price movements. Increases in international prices feed into local pump prices almost immediately, setting off a chain reaction across the economy.

Fuel hikes pose immediate risks to the country, since fuel drives transport, powers industry, and underpins the movement of goods across the country. Once fuel prices rise, the effect spreads quickly, transport operators adjust fares as happened this week, logistics costs increase, and businesses begin to reconsider the pricing of goods and services to protect already thin margins.

In the past, wars like the Russia-Ukraine war provided a recent template of how distant geopolitical conflicts can reshape domestic price conditions. At the height of that crisis, global supply chains for grain, fertiliser and edible oils were severely disrupted, pushing food prices higher across import-dependent economies.

Annual food inflation reported by Statistics Botswana last year rose marginally in October to 5.5% from 5.4% in September, driven mainly by an increase in average meat prices.

Statistics Botswana figures show that an index tracking the average prices of meat rose to eight percent in October, from 7.3% in September. Meat carries the second-highest weighting in the basket of items measured by Statistics Botswana to calculate food inflation. The heaviest item, bread and cereals, was unchanged at an annual rate of 3.9% between September and October.

The data agency’s numbers also show that in the 12 months to October, coffee, tea and cocoa prices have risen the highest at 13.5%, however their impact on overall food inflation was muted as their weighting in the basket is amongst the lowest. Fuel-driven inflation tends to be broader and more persistent, feeding into nearly every sector of the economy. As transport costs rise, food prices follow. As production costs increase, retail prices adjust. The result is a steady erosion of purchasing power, particularly for households already grappling with weak income growth.

Early signs of that strain are already visible in consumption trends. Recent GDP data shows that both household and government consumption declined in the final quarter of 2025, pointing to a slowdown in demand across the economy. As prices rise further, consumption is likely to weaken even more, reinforcing the broader economic slowdown.

This is particularly concerning in Botswana’s context, where economic activity remains heavily anchored on government expenditure. Public spending continues to dominate GDP, so any slowdown in government consumption or fiscal tightening has an immediate, amplified effect on overall growth. With mineral revenues under pressure due to subdued diamond output, the government’s ability to sustain high levels of spending is increasingly constrained.

Finance authorities have already warned of a difficult year ahead, with expectations that economic growth will remain subdued in the near term. The outlook hinges largely on a recovery in the diamond sector and some stabilisation in global markets, both of which remain uncertain.

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