Like oil-exporting countries now mired in deficits because their annual budgets were predicated on oil priced at $100 a barrel that’s now well below $50, Botswana faces a similar conundrum created by a drop in the sale and prices of its rough diamonds. Diamonds account for about a third of the country’s gross domestic product (GDP), 80 percent of exports and 40 percent of the entire government’s revenues. Last week, Botswana’s Ministry of Finance cut its GDP growth forecast for 2015 to 2.6 percent from an earlier projection of 4.9 percent. The treasury also revised its budget to post a deficit as a percentage of GDP to 1.1 percent for fiscal year 2015/16 rather than the surplus initially touted.
“The downside risk to these projections continues to be the country’s high dependence on diamonds, whose demand and prices are subject to global fluctuations,” the ministry wrote in a 2016/17 budget-strategy paper published September 11.
