The economy of Botswana is anticipated to contract by 1.7% this year, mainly due to a prolonged decrease in diamond sales, as stated by Finance Minister Ndaba Gaolathe.

In a cautionary address to lawmakers on Thursday night, Gaolathe, who is also the vice president, warned that the economy is confronted with additional threats that could worsen what is likely to be the most significant downturn since the COVID-19 pandemic in 2020.

“These threats include possible further disruptions in the diamond market, extreme weather occurrences such as droughts, floods, and cyclones, along with persistent challenges at our primary power facility,” he commented.

Originally projected to grow by 4.2% this year, with a growth of 2.7% in 2023, the economy is expected to recover next year, targeting a growth rate between 4% and 5%, according to Gaolathe.

“This forecast aligns with anticipated global recovery, particularly in key diamond markets, coupled with ongoing positive growth in the non-mineral sector,” he added.

This southern African nation’s economy is heavily dependent on mining, particularly diamonds, which account for about a third of budget revenues and a substantial share of foreign currency earnings.

The finance minister also disclosed various cost-reduction strategies in response to earlier assessments suggesting that this fiscal year’s budget deficit might surpass initial predictions, reaching 6.7% of gross domestic product.

These initiatives are aimed at achieving a balanced budget “in the shortest time possible” by aligning expenditures with forecasted revenues and revitalizing the country’s long-stalled public-private partnership policy, he noted.

© 2024 Bloomberg

Stay informed with Moneyweb’s extensive finance and business news on WhatsApp here.