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Botswana will cut its growth forecast due to the prolonged downturn in the diamond market

A senior official in the financial ministry said that Botswana's economic growth projection for 2025 will be cut to zero because of a prolonged decline in the diamond industry. The budget deficit is also expected to increase due to the reduced diamond revenues.

Botswana has the highest value of diamonds in the world. Its economy is heavily dependent on diamond exports which contribute to around 30% of its national revenue and 75% of its foreign exchange earnings.

Ndaba Gaolathe, the finance minister, had forecasted a 3.3% increase in this year's budget in the 2025 Budget announced in February. This was based on the expected recovery in the diamond industry.

He had predicted a budget deficit of 7.56 % of the gross domestic product for the financial year 2025/26, which runs from April to march. This was lower than his previous estimate of 9% GDP.

Tshokologo Alex Kganetsano, permanent secretary at the Ministry of Finance, told a meeting of the Parliamentary Audit Committee on Monday that these estimates are no longer achievable.

Kganetsano stated that "in view of the events since...February, we will revise downwards this growth projection."

We have a preliminary number of almost zero percent. However, this figure must be vetted internally before it can be made public.

The International Monetary Fund predicts that Botswana’s economy will contract by 0.4% in this year.

The Botswana economy is expected to contract by 3% this year, mainly due to the downturn in the diamond markets. However, the government was expecting mineral revenues to increase significantly, including diamonds. This would have helped it avoid another recession.

Kganetsano stated that "the trend does not seem to be improving, but rather it is a deteriorating."

He added, "As a result of the slowdown in inflows, we are sitting on unpaid invoices for government suppliers."

He said that a significant drop in revenue has led to massive liquidity issues, which threaten the financial sustainability and viability of government operations. (Reporting and editing by Alessandro Parodi, Susan Fenton and Brian Benza)

(source: Reuters)