Botswana Budget 2025/2026: A Transformational Agenda Amid Fiscal Constraints

The Botswana 2025/2026 Budget Speech, delivered by Finance Minister Ndaba Nkosinathi Gaolathe, marks a pivotal moment in the country’s economic trajectory. With a new administration in place, this budget aligns with the National Development Plan 12 (NDP 12) and introduces ambitious reforms aimed at revitalizing Botswana’s economic foundation.

However, fiscal constraints, declining government revenues, and slow growth pose formidable challenges.

The government has outlined a four-phase economic transformation plan, addressing fiscal leakages, economic stabilization, and long-term sustainability. With a projected budget deficit of P22.12 billion (7.56% of GDP), the budget aims to balance investment in infrastructure, social welfare, and digital transformation while restoring fiscal discipline.

Economic Context & Key Industry Insights

1. Botswana’s Economic Performance

Botswana’s economy has faced sluggish growth, mainly due to declining diamond revenues. In 2024, GDP contracted by -3.1%, a sharp contrast to the 3.5% growth in 2023. While the non-diamond sector showed resilience with 4.2% growth, diamond mining and trading collapsed by 44.1%.

The macroeconomic outlook remains uncertain, with Botswana’s foreign exchange reserves dropping from P84.9 billion (2015) to P53.6 billion (2024). This sharp decline, coupled with a widening budget deficit, necessitates urgent fiscal discipline and revenue maximization.

2. Key Growth Sectors & Investment Priorities

• Infrastructure Development: A P11.54 billion investment in roads, rail, aviation, and renewable energy to position Botswana as a regional logistics and energy hub.
• Energy & Diversification: A renewable energy shift, targeting 8,000 MW within four years through solar and wind projects in Jwaneng, Letlhakane, and Bobonong.
• Agriculture & Food Security: The government is revamping agricultural subsidies and modernizing land policies to boost local production and exports.
• Digital Transformation & Innovation: P1.47 billion is allocated for national broadband expansion, digital education, and partnerships with MIT for innovation-driven enterprises.
• Private Sector-Led Growth: A P0.93 billion investment in SMEs, free trade agreements (AfCFTA, SADC-EPA), and commercial dispute resolution courts.
  

3. Fiscal Reforms & Governance

The government is implementing structural reforms to enhance public finance management, including:

• Tax Reforms: New Tax Administration, VAT, and Income Tax Acts to modernize revenue collection.
• Debt Strategy: The government is shifting towards domestic debt financing to reduce external borrowing risks.
• Public Procurement Reforms: Strengthening the Public Procurement Regulatory Authority (PPRA) to curb wasteful spending and procurement inefficiencies.

Major Budget Priorities & Sector Breakdown

1. Infrastructure & Transportation (P11.54 Billion)

• Roads & Rail: Multi-billion Pula investments in highway expansions, rail projects, and new urban transport networks.
• Aviation: New airline partnerships to improve Botswana’s global air connectivity.
• Renewable Energy: Expansion of solar and wind power plants to reduce reliance on imported electricity.
  

2. Social Welfare & Quality of Life (P9.81 Billion)

• Health: New hospitals, digital health records, and universal health insurance development.
• Education: Strengthening Technical & Vocational Education (TVET) to match industry needs.
• Social Protection:
  • Old Age Pension increased from P830 to P1,400 per month.
  • Newborn allowance of P300 per month for the first year.
  • Free sanitary pads for female students.
    

3. Digital Transformation & Innovation (P1.47 Billion)

• National broadband expansion connecting villages & 500 schools.
• Financial digitalization: Botswana is launching a National Retail Payments Switch for faster mobile money and banking integration.
• MIT Collaboration: A five-year innovation partnership to develop Botswana’s entrepreneurial ecosystem.
  

4. Private Sector Development (P0.93 Billion)

• SME Growth & Market Access: Government-backed funding for exports, manufacturing, and agribusiness expansion.
• Commercial Courts: Reducing business dispute resolution times from 660 days to under a year.
• Free Trade Agreements: Botswana is leveraging AfCFTA & SADC-EPA to expand export opportunities.

Challenges & Risks to Watch

1. Fiscal Sustainability: With a P22.12 billion budget deficit, Botswana must balance essential spending with debt control.
2. Economic Diversification Risks: Heavy reliance on diamonds (P15.75 billion revenue) remains a key vulnerability.
3. Energy & Water Crisis: Delays in renewable energy projects and water shortages in key industrial areas pose serious economic risks.
4. Global Uncertainty: Botswana’s economy remains highly exposed to global trade fluctuations, particularly China’s demand for diamonds.
5. State-Owned Enterprises (SOE) Reform: Long-standing inefficiencies in BMC, BURS, and Botswana Railways require urgent financial restructuring.

A Bold but Challenging Path Ahead

The 2025/2026 Botswana Budget is a strategic yet cautious response to economic and fiscal challenges. While the focus on infrastructure, private sector growth, and digital transformation is commendable, the execution of these plans will be crucial.

The new government’s commitment to fiscal discipline, public procurement transparency, and governance reforms will determine whether Botswana successfully stabilizes its economy and reduces its dependency on diamonds. Investors and businesses should closely monitor the government’s ability to implement key reforms and attract sustainable investment.