IMF flags deepening growth bottlenecks as Botswana’s diamond model comes under strain

BOTSWANAS longstanding growth model, anchored in diamond revenues and strong public institutions, is facing mounting strain, with deep-seated structural bottlenecks threatening the country’s medium-term growth prospects and efforts to diversify the economy, according to a new International Monetary Fund (IMF) analysis.

- SIPHELELE DLUDLA

In its recent Selected Issues Paper, "Addressing Growth Bottlenecks in Botswana", the IMF warned that while Botswana achieved exceptional economic and social progress after independence, economic momentum has weakened markedly over the past two decades.

Growth has slowed, unemployment, particularly among the youth, has risen to persistently high levels, and fiscal and external buffers have eroded.

The IMF said the situation has been exacerbated by a sharper-than-expected and likely prolonged decline in global diamond demand, which triggered a severe economic contraction in 2024.

With fiscal space now constrained and consolidation unavoidable, the IMF said the urgency of long-delayed diversification reforms has intensified.

Botswana's economy remains highly concentrated in the capital-intensive diamond sector, which accounts for around 80% of exports, leaving it vulnerable to external shocks and commodity cycles. Manufacturing contributes only about 5% of GDP, far below regional peers such as South Africa and Namibia.

The IMF noted that Botswana's Economic Complexity Index has deteriorated over the past two decades, signalling a narrowing export base and limited progress into higher-value, knowledge-intensive industries.