The International Monetary Fund (IMF) has revised Botswana’s growth forecast for 2024 down to 1% from the previous estimate of 3.6% in April. This adjustment comes as a result of a decline in diamond production, according to a statement from the IMF.
Additionally, the IMF expects the budget deficit to widen to 6% from 3.45% due to a decrease in mineral revenues. The IMF has advised Botswana, known for its diamond reserves, to consider scaling back new infrastructure projects in order to stabilize the economy.
“The economic slowdown is primarily attributed to a drop in diamond production,” stated the IMF in a late Friday release. The IMF recommended some fiscal leniency for the current year in light of decreased mineral revenues but cautioned against proceeding with capital projects at a rapid pace to mitigate the deficit’s deterioration and prioritize projects with higher returns.
The diminished demand for diamonds, often viewed as luxury items, has been attributed to lower consumer spending and global economic fragility. Finance Minister Peggy Serame projected a 4.2% growth rate for the economy in February, but the central bank later warned that achieving this target was unlikely due to ongoing challenges in the global diamond market.
Botswana relies heavily on diamond sales for between 30-40% of revenue and 75% of foreign exchange earnings. The country’s economic outlook has been significantly impacted by the decline in diamond production and subsequent decrease in mineral revenues.
