{
  "title": "IMF Executive Board Concludes 2022 Article IV Consultation with Botswana",
  "publication": "IMF News, July 27, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/07/26/pr22275-imf-executive-board-concludes-2022-article-iv-consultation-with-botswana",
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  "summary": "IMF Executive Board Concludes 2022 Article IV Consultation with Botswana",
  "publishDate": "2022-07-27",
  "sections": [
    {
      "heading": "Overview and Executive Board assessment",
      "content": "- The Executive Board concluded the Article IV consultation with Botswana and endorsed the staff appraisal without a meeting on a lapse-of-time basis.\n- Botswana recovered to its pre-pandemic output level; the economy grew by 11.4 percent in 2021.\n- A successful vaccination campaign, prudent macroeconomic management, and strong demand for diamonds supported the recovery.\n- The next Article IV consultation is expected to be held on the standard 12-month cycle."
    },
    {
      "heading": "Economic performance and outlook",
      "content": "- Growth:\n  - The economy grew by 11.4 percent in 2021.\n  - Growth is projected at about 4¼ percent in 2022 and 4 percent per annum through the medium term.\n- Inflation:\n  - Inflation exceeded the Bank of Botswana’s medium-term 3–6 percent objective range.\n  - Inflation is projected at 11 percent in 2022.\n- Labor market:\n  - Unemployment rose close to record highs.\n  - Botswana needs to create jobs to absorb the 35,000 annual labor market entrants.\n- Drivers and assumptions for the outlook:\n  - Higher prices and demand for diamonds, increased copper production, prospects for a good harvest, less COVID-19 mobility restrictions, and more international tourist arrivals.\n  - The outlook depends on the course of the war in Ukraine, the pandemic, and implementation of fiscal consolidation and economic diversification plans.\n- Key projection headline figures (from Table 1):\n  - Real GDP (annual percent change): 2018: 4.2; 2019: 3.0; 2020: -8.7; 2021: 11.4; 2022 Projection: 4.3; 2023 Projection: 4.0.\n  - GDP per capita (US dollars): 2021: 7,337; 2022 Projection: 7,510; 2023 Projection: 7,765; 2027 Projection: 9,627.\n  - Consumer prices (average): 2021: 6.7; 2022 Projection: 11.0; 2023 Projection: 5.8.\n  - Diamond production (millions of carats): 2021: 23.2; 2022 Projection: 24.0; 2027 Projection: 26.6."
    },
    {
      "heading": "Fiscal policy, public finances, and public sector reforms",
      "content": "- Fiscal stance and objectives:\n  - Implementing the planned medium-term fiscal consolidation will rebuild buffers and financial assets for future generations.\n  - The consolidation plan will achieve fiscal surplus over the medium term and rebuild the Government Investment Account.\n- Required institutional reforms:\n  - Adopt a public wage formation framework.\n  - Anchor fiscal policy in a credible medium-term fiscal framework.\n  - Formalize a new fiscal rule in National Development Plan 12.\n  - Increase transparency and accountability in spending to catalyze public support for fiscal reform and revenue collection.\n  - Improve public investment efficiency and the quality of public procurement.\n- State-owned enterprises and revenue:\n  - Joint ventures of identified SOEs with the private sector and efforts to close the tax gap should proceed as planned.\n- Table 1 fiscal indicators (percent of GDP unless otherwise indicated):\n  - Total revenue and grants: 2018: 30.5; 2019: 26.1; 2020: 31.3; 2021: 31.7; 2022 Projection: 32.3; 2023 Projection: 31.4; 2024 Projection: 30.6.\n  - Total expenditure and net lending: 2018: 35.6; 2019: 36.9; 2020: 37.2; 2021: 34.0; 2022 Projection: 30.3; 2023 Projection: 28.7; 2024 Projection: 28.0.\n  - Overall balance (deficit –): 2018: -5.1; 2019: -8.6; 2020: -11.1; 2021: -2.7; 2022 Projection: -1.8; 2023 Projection: 0.6.\n  - Non-mineral primary balance: 2018: -18.6; 2019: -19.0; 2020: -18.5; 2021: -16.2; 2022 Projection: -16.6; 2023 Projection: -11.9; 2024 Projection: -10.5.\n  - Total central government debt: 2018: 19.5; 2019: 21.5; 2020: 24.2; 2021: 24.3; 2022 Projection: 25.0; 2023 Projection: 24.6; 2027 Projection: 16.3."
    },
    {
      "heading": "Monetary policy and inflation management",
      "content": "- Monetary tightening:\n  - To combat rising inflation, the Bank of Botswana raised the newly introduced Monetary Policy Rate (MOPR) by a combined 101 basis points in April and June 2022.\n  - Bringing inflation back within the Bank of Botswana’s objective range will require additional monetary tightening.\n- Monetary policy framework and recommendations:\n  - The newly created monetary policy rate will over time enhance monetary policy transmission and implementation.\n  - Strengthened monitoring and communication would help limit risks of volatility in interbank rates and disruptive capital flows.\n  - Lifting the restrictions on the current prime lending rate in due course would contribute to the efficiency of financial intermediation and financial access.\n- Money and banking indicators (selected):\n  - Monetary Base (annual percent change): 2018: 17.5; 2019: -7.0; 2020: -42.1; 2021: 33.2; 2022 Projection: 14.3.\n  - Broad money (M2) (annual percent change): 2018: 8.3; 2019: 8.0; 2020: 5.9; 2021: 5.0; 2022 Projection: 6.3.\n  - Credit to the private sector (annual percent change): 2018: 6.6; 2019: 7.1; 2020: 5.3; 2021: 10.2; 2022 Projection: 10.3."
    },
    {
      "heading": "External sector and exchange rate policy",
      "content": "- External position:\n  - The external position is broadly in line with fundamentals and desirable policies.\n  - Fiscal consolidation and higher diamond exports should strengthen the current account and support reserves accumulation.\n- Exchange rate policy:\n  - Maintaining the current crawl rate would be appropriate as domestic interest rates rise.\n  - Continuing to allow flexibility within the current exchange rate regime should help the economy adjust to shocks and facilitate structural transformation.\n- External sector indicators (selected):\n  - Current account balance (percent of GDP): 2018: 0.4; 2019: -6.9; 2020: -0.5; 2021: 1.7; 2022 Projection: 2.6; 2023 Projection: 4.4; 2024 Projection: 4.9; 2025 Projection: 5.7.\n  - Gross Official Reserves (end of period, Millions of US$): 2018: 6,657; 2019: 6,172; 2020: 4,944; 2021: 4,806; 2022 Projection: 4,968; 2023 Projection: 5,292; 2027 Projection: 8,744.\n  - Months of Imports of Goods and Services: 2018: 10.4; 2019: 10.0; 2020: 6.2; 2021: 7.3; 2022 Projection: 8.1; 2023 Projection: 9.3.\n  - Exports of goods and services, f.o.b. (% change): 2018: 9.1; 2019: -17.3; 2020: -22.8; 2021: 63.9; 2022 Projection: -0.4; 2023 Projection: 12.0."
    },
    {
      "heading": "Risks, reform priorities, and the Reset Agenda",
      "content": "- Downside risks:\n  - Strength of commodity markets, China’s growth, the pace of tightening of monetary policy in advanced economies, geopolitical shocks (including the war in Ukraine), pandemic developments, and climate shocks.\n- Vulnerabilities:\n  - Relatively low fiscal buffers and continued reliance on mining expose Botswana to external shocks.\n- Policy priorities and recommendations:\n  - Some near-term fiscal support may be needed to cushion the most vulnerable households from the effects of rising global inflation; improving the targeting of social programs will reduce leakages.\n  - Accelerated implementation of the “Reset Agenda” should help diversify the economy towards financial services (facilitated by fintech), manufacturing, and tourism.\n  - Reforms to enhance accountability, competition, and governance, deepen trade integration, and accelerate the energy transition.\n  - Move away from inward-looking policies such as import restrictions; undue reliance on import substitution and restrictions to promote industrialization could be counterproductive.\n- Expected benefits:\n  - Successful implementation of the Reset Agenda will enhance resilience, ensure sustained high-job rich growth, and help transform Botswana into a high-income status as per Vision 2036.\n\nSource: IMF Press Release No. 22/275 — IMF Executive Board Concludes 2022 Article IV Consultation with Botswana\n\n---\n\n\n References\n\n- Botswana and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/07/26/pr22275-imf-executive-board-concludes-2022-article-iv-consultation-with-botswana"
    }
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    "Published: July 27, 2022",
    "The Executive Board concluded the Article IV consultation with Botswana and endorsed the staff appraisal without a meeting on a lapse-of-time basis.",
    "Botswana recovered to its pre-pandemic output level; the economy grew by 11.4 percent in 2021.",
    "A successful vaccination campaign, prudent macroeconomic management, and strong demand for diamonds supported the recovery.",
    "The next Article IV consultation is expected to be held on the standard 12-month cycle.",
    "Growth:",
    "Inflation:",
    "Labor market:",
    "Drivers and assumptions for the outlook:",
    "Key projection headline figures (from Table 1):",
    "Fiscal stance and objectives:",
    "Required institutional reforms:",
    "State-owned enterprises and revenue:",
    "Table 1 fiscal indicators (percent of GDP unless otherwise indicated):",
    "Monetary tightening:",
    "Monetary policy framework and recommendations:",
    "Money and banking indicators (selected):",
    "External position:",
    "Exchange rate policy:",
    "External sector indicators (selected):",
    "Downside risks:",
    "Vulnerabilities:",
    "Policy priorities and recommendations:",
    "Expected benefits:",
    "[Botswana and the IMF](http://www.imf.org/external/country/BWA/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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