The International Monetary Fund (IMF) has significantly downgraded its growth forecast for Botswana’s economy in 2024. Citing a decline in diamond production, the IMF revised its projection from 3.6% to just 1%.
This downward revision comes on the heels of falling global demand for diamonds, traditionally a luxury good impacted by weaker consumer spending and a sluggish global economy. The IMF also highlighted a widening budget deficit, expected to reach 6% due to the drop in mineral revenue.
“The continued economic slowdown is primarily driven by a decrease in diamond production,” stated the IMF in a recent press release. The organization advised the diamond-rich southern African nation to consider delaying new infrastructure projects to manage the economic challenges.
While the IMF acknowledged the need for some fiscal flexibility due to declining mineral revenue, it emphasized the importance of prioritizing high-return projects and slowing down ambitious capital spending to curb the deficit’s rise.
This news comes after Botswana’s Finance Minister, Peggy Serame, expressed optimism in February, projecting a growth rate of 4.2%. However, the central bank later cautioned that this target was unlikely to be met due to persistent headwinds in the global diamond market.
Diamonds are a critical pillar of the Botswana economy, contributing significantly to both government revenue (30-40%) and foreign exchange earnings (75%). The IMF’s revised forecast underscores the vulnerability of the economy to fluctuations in the diamond market.
