IMF optimistic on Botswana rebound, but warns of price pains
Lewanika Timothy | Monday October 26, 2026 06:00
The October World Economic Outlook (WEO) forecasts Botswana’s economy to recover from last year’s 0.7 percent contraction, that was mainly driven by a slowdown in the diamond mining sector. In April, researchers had projected a stronger expansion of 4.7 percent for 2026.
Whilst the IMF has maintained a cautious economic outlook for the country it has sounded the alarm over cost of living. Researchers now expect inflation to average 7.2 percent this year, up from the 5.1 percent projected in April. For 2027, the forecast has increased from 5.7 percent to 7.4 percent, suggesting more persistent pressure on household purchasing power.
“Low-income countries and households remain especially vulnerable to higher food prices from transport disruptions, higher fertiliser costs, export restrictions and extreme weather events,” IMF researchers warned.
Whilst both the IMF and government anticipate a recovery, they have differed over its pace. In February, the Ministry of Finance had projected growth at 3.1 percent this year and 5.4 percent next year. The IMF therefore sees a faster rebound in 2026, followed by a substantially slower expansion in 2027.
Government’s outlook rests on mining recovery and growth outside mining, supported by NDP12 and the Botswana Economic Transformation Programme. However, BoB warned that delays in implementing the programme could leave growth below projections.
Despite upbeat economic output forecasts, Anglo American’s latest production update shows output at De Beers’ Botswana operations rising 14% to 15.1 million carats in the first nine months, from 13.3 million a year earlier. However, third-quarter production fell 20% following planned maintenance at Orapa.
“Planned plant maintenance at Jwaneng in Q4 2026 is expected to substantially decrease production levels from Q3 2026 rates,” Anglo said.
Whilst De Beers increased its global production guidance to between 25 million and 28 million carats, that change reflects increased ownership of a Canadian mine. For Botswana’s growth outlook, the relevant evidence is the stronger output so far and the expected slowdown towards year end.
The inflation outlook, meanwhile, reflects pressure reaching the economy through energy, food, and the cost of importing goods.
IMF researchers identify the prolonged Middle East conflict and disruptions to energy supplies and trade routes as threats to energy-importing economies. Higher fuel costs also make farming, manufacturing and moving goods more expensive, allowing the initial shock to spread into other prices.
“For energy importers, higher fuel prices present a stagflationary challenge by simultaneously raising headline inflation and depressing output,” researchers said.
The fund also warns that limited fiscal room can constrain governments ability to cushion households, whilst higher borrowing costs could restrain investment. Energy importers outside the technology investment boom face fewer sources of growth to offset these pressures.
In Botswana, BoB has linked price pressures to domestic fuel costs, electricity tariffs, public transport fares and medical aid premiums. It also warns that a weaker pula against the rand could make imports from South Africa more expensive.
Food supplies face additional risks. BoB says livestock movement and slaughter restrictions associated with Foot and Mouth Disease could add to food inflation. This comes alongside international pressures from expensive energy, fertiliser, and transport.
Extreme weather conditions could compound those costs by reducing harvests and tightening supplies. The IMF identifies drought, flooding and water stress associated with El Niño as risks to commodity markets.
In September, inflation reached 7.8 percent, above the BoB’s three to six percent objective range. The September level was down from 9.3 percent.