Botswana’s 2025–2026 budget is presented amidst economic challenges, with a projected GDP growth of 3.3 percent following a 3.1 percent contraction in 2024, largely due to a sharp decline in the diamond sector.
Growth relies on diamond demand recovery and resilience in non-diamond mining, but external uncertainties, including geopolitical tensions and supply chain disruptions, pose risks. Inflation declined to 1.7 percent in December 2024 and is expected to stay within the three to six percent target range. The Bank of Botswana maintains an accommodative stance, keeping rates at 1.90 percent and lowering the reserve requirement to zero percent, but persistent external shocks could necessitate tighter policies. Foreign reserves have fallen to P53.6 billion, with only P2 billion available for government use, highlighting fiscal vulnerabilities. Whilst the budget acknowledges structural challenges such as unemployment and income inequality, it lacks bold strategies for economic diversification. Although non-diamond mining has shown resilience, sectors like agriculture, tourism, and manufacturing require stronger policy support to drive sustainable economic transformation.
Revenue generation and sustainability
The Government projects revenue and grants at P75.49 billion, with Southern African Customs Union (SACU) transfers contributing P24.36 billion, followed by non-mineral income tax (P19.01 billion) and mineral revenue (P15.75 billion). VAT collections are expected to reach P12.10 billion. However, heavy reliance on SACU transfers remains a risk, given their volatility. A 1.5 percent increase in corporate and top personal income tax is introduced to enhance revenue whilst keeping Botswana’s tax rates competitive. The tax-to-GDP ratio stands at 13%, below the African average of 16% and SACU’s 20%, signalling the need for better domestic resource mobilisation. Efforts to improve VAT tracking, digital taxation, and enhance tax collection through the Botswana Unified Revenue Service (BURS) are steps in the right direction.
Expenditure priorities and efficiency
Total expenditure is projected at P97.61 billion, with recurrent spending at P72.61 billion and development spending at P23.75 billion. A significant portion of the recurrent budget is driven by salaries and operational costs. Infrastructure investment receives P11.54 billion, targeting roads, water supply, sanitation, and new hospitals in Tsabong, Tonota, and Shoshong. However, inefficiencies and cost overruns in infrastructure expansion must be addressed. Whilst education and healthcare remain priorities, spending alone does not guarantee improved service delivery. Governance, transparency, and efficiency reforms are crucial. The budget outlines reductions in financial support to commercial state-owned enterprises (SOE) and local authorities, aiming for fiscal discipline, though careful transition management is needed to avoid service disruptions.
Deficit and debt management
Botswana faces a budget deficit of P22.12 billion (7.56 percent of GDP), to be financed through domestic and external borrowing. The country’s net financial assets have declined significantly, from 31% of GDP in 2008–2009 to -24% by November 2024. Public debt stands at P71.01 billion (25.75% of GDP), within the statutory 40% threshold, but continued deficits could push Botswana toward unsustainable debt levels. The Government’s medium-term debt strategy prioritises domestic bond issuance over external borrowing, but success depends on a well-developed local capital market.
Economic diversification and industrial policy
The budget stresses the need for diversification to reduce reliance on diamonds. Whilst GDP growth is forecasted at 3.3 percent in 2025, the diamond sector’s 22.9% contraction in 2024 underscores the urgency for alternative economic drivers. Non-diamond mining showed resilience with a 4.2 percent growth in early 2024, but the budget lacks bold new initiatives to accelerate industrial expansion. The Government aims to promote mineral beneficiation, such as the expansion of Khoemacau Copper Mine, which is expected to double employment. Additionally, value-added activities in agriculture and manufacturing, including support for the Selebi-Phikwe Citrus project, are highlighted. However, industrial policies remain fragmented, and stronger incentives for agro-processing, textile production, and high-value exports are necessary. Botswana’s participation in the African Continental Free Trade Area (AfCFTA) presents opportunities, but competitiveness challenges persist.
Employment and human capital development
Unemployment remains a critical issue, particularly among youth, with the jobless rate at 38.4% in early 2024. The budget acknowledges skill mismatches, proposing increased technical and vocational education and training (TVET) enrolment. Public TVET institutions operate at 56% capacity, with only 37.2% female participation, highlighting a gender gap. Modernising TVET programmes and aligning them with priority sectors such as artificial intelligence (AI), agriculture, and underground mining are positive steps. Despite Botswana allocating 22% and 14% of total expenditure to education and health over four years, returns remain suboptimal. Without stronger academia-industry links, skills development may not translate into employment. This further worsens unemployment, particularly among youth. The challenge is ensuring that training supports emerging industries such as renewable energy, manufacturing, and digital services.
Social protection and welfare
The budget enhances social welfare, increasing the Old Age Pension from P830 to P1,400 per month (though this was anticipated to be P1,800) from April 2025 and introducing a P300 monthly allowance for newborns up to one year. Free sanitary pads for female students are also a welcome development. These measures aim to reduce inequality and improve living standards. However, fiscal constraints limit broader welfare expansions. The Government commits to financing these measures through reprioritisation rather than deficit increases. Long-term sustainability will depend on revenue mobilisation and efficient spending. Stronger mechanisms for social safety nets, fraud prevention, and economic empowerment for vulnerable groups are required.
Infrastructure development and public sector investment With P11.54 billion allocated for infrastructure, the budget prioritises roads, water supply, electricity, and digital connectivity. Major hospital and road projects are planned, but Botswana’s history of cost overruns and delays necessitates stronger project governance. Public-Private Partnerships (PPP) are expected to play a key role, with a new legal framework under development. Energy investments aim to generate 8,000MW within four years, including a 600MW coal-fired power plant in Mmamabula and several solar projects. Whilst these projects could drive growth and job creation, concerns remain about procurement inefficiencies and execution capacity within Government agencies.
Climate change and sustainability
Despite Botswana’s vulnerability to droughts and climate risks, the budget provides limited direct allocations for environmental sustainability. Investments in renewable energy, such as a 200MW solar plant in Maun and a 100MW wind power project in Letlhakane, signal progress, but broader sustainability policies are lacking. Rain-fed agriculture heightens climate risks, necessitating stronger investments in irrigation, drought-resistant crops, and water security. Major projects like the Chobe-Zambezi Water Transfer Scheme offer long-term solutions. However, integrating climate resilience into budget planning requires more comprehensive frameworks aligned with Botswana’s commitments under global environmental agreements.
Regional and global considerations
Botswana’s economic performance is tied to regional and global factors. With global GDP expected to grow by 3.3 percent in 2025 and SACU transfers contributing significantly to revenue, trade stability is vital. AfCFTA presents export expansion opportunities, but inefficient customs procedures and trade infrastructure limit competitiveness. External shocks, such as a weakening diamond market and geopolitical tensions, pose downside risks. To mitigate these risks, Botswana must accelerate industrial diversification and strengthen trade logistics to access global markets effectively. Opportunities and challenges for BA ISAGO University BA ISAGO University, as a private tertiary institution largely dependent on Government-sponsored students, stands to benefit from the budget's emphasis on education funding and skills development. The Government's continued commitment to higher education, including increased technical and vocational training (TVET) and digital literacy initiatives, suggests a stable demand for tertiary education. However, challenges persist, particularly regarding the budget’s focus on restructuring TVET and aligning education with labour market needs. If Government funding shifts more toward technical and vocational education, traditional universities may face declining enrolments. Furthermore, with only 56% of TVET institutions currently utilised, a policy shift towards prioritising their expansion could divert funding from private institutions like BA ISAGO. The University must adapt by offering qualifications aligned with national economic priorities, such as AI, renewable energy, and entrepreneurship, to remain competitive in an evolving education landscape. Strengthening industry linkages and incorporating digital learning platforms could also enhance BA ISAGO's relevance and sustainability in the face of potential shifts in funding priorities.
Conclusion Botswana’s 2025–2026 budget reflects an effort to balance fiscal consolidation with economic recovery. Whilst it takes steps toward modernisation, revenue enhancement, and infrastructure investment, challenges remain in diversification, debt sustainability, and employment creation. The success of this budget hinges on effective implementation, policy discipline, and adaptability to external shock.
*Dr Lovemore Taonezvi holds a Ph.D. in Economics. He is an economist and a lecturer at BA ISAGO University.
