An IMF team, led by Luc Eyraud, division chief in the IMF African Department, visited Gaborone between July 4 and 14 and held discussions with various monetary and fiscal authorities.
In a statement made available after the visit, Eyraud said the local economy was expected to grow by 3.8% this year on account of the lower diamond output and weaker global economy. The projection is marginally higher than the 3.7% forecast for Botswana by the IMF in its April World Economic Outlook, but lower than government’s own expectations of four percent growth this year.
The forecasts by both government and the IMF are lower than the 5.8% growth recorded last year.
“The expected slowdown reflects a decline in diamond production and prices this year, with weaker global growth likely to depress other exports,” Eyraud said. “This will be partly offset by growth in the non-mining sector, with a fiscal relaxation supporting household consumption and public investment. “Growth is forecast to rebound gradually in 2024 and 2025, to above four percent, due to higher prices and quantities of diamonds produced.”
Debswana, the country’s major diamond producer, reported output of 6.9 million carats in the first three months of the year, up from 6.2 million carats in the corresponding period last year. The country’s only other producer, Lucara, announced output of 89,640 carats in the first quarter, up from 83,917 carats over the same period last year. Both producers are expected to release their half year figures in the next few weeks.
Industry experts have noted pressures on diamond demand in the global market, due mainly to uncertainties facing consumers, particularly in the United States. The retail end of the diamond pipeline is also still dealing with high amounts of inventory from last year’s stronger market.
Eyraud said fiscal consolidation by government was critical, along with the rebuilding of buffers.
“The fiscal deficit is projected to widen by about two percent of GDP in the 2023 financial year, mostly due to higher budgeted capital expenditure. “In the subsequent two years, the government plans to improve the fiscal position by two and a half percent of GDP and achieve a small fiscal surplus, by containing the wage bill and transfers. “Consolidation is critical to preserve fiscal sustainability and support foreign reserves. “The large depletion of government deposits in recent years, combined with the longer-term prospects of exhaustion of diamond resources, calls for fiscal prudence,” he said.
In February, the Finance Ministry forecast a P7.6 billion deficit for the 2023-24 financial year, or 3.06 percent of GDP. This follows an estimated P4.9 billion deficit or 2.1% of GDP for the 2022-23 financial year.
The Transitional National Development Plan, approved by Parliament in December last year, expects surpluses to begin showing up in the budget from the 2024-25 financial year.
