## IMF Staff Completes 2024 Article IV Mission to Botswana

_IMF News, July 12, 2024_

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## Bibliographic details
- Published: July 12, 2024

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### Mission and context
- IMF team led by Mr. Luc Eyraud, Division Chief in the IMF African Department and Mission Chief for the Republic of Botswana, visited Gaborone and held discussions from July 2-12, 2024.
- Press Release No. 24/270.

### Economic growth and outlook
- Growth slowed from 5.5 percent in 2022 to 2.7 percent in 2023, below the long-run potential growth of 4 percent.
- Growth is expected to decelerate further in 2024, with growth projected at 1 percent.
- Medium-term growth is expected to converge towards 4 percent as diamond mining recovers.
- Main near-term drag: sharp decline in diamond trading and mining activities due to decreased global demand for rough diamonds.
- Partial offset to the slowdown: construction projects financed by fiscal expansion.

### Inflation and monetary policy
- Inflation peaked at 14.6 percent in August 2022 and declined rapidly thereafter.
- Inflation has remained below the ceiling of Bank of Botswana’s (BoB) objective range since spring 2023.
- BoB objective range: 3 – 6 percent.
- Inflation is expected to remain within the BoB’s 3 – 6 percent objective range over the medium term.
- BoB has cut its policy rate twice by a cumulative 50 basis points since December 2023, following a 151 basis points increase during 2022.
- Key drivers of inflation decline: falling oil prices and easing international oil and food prices.

### Fiscal developments and recommendations
- FY2022: budget balance.
- FY2023: estimated deficit of 4.7 percent of GDP, reflecting significant fiscal relaxation due to a decline in mineral revenues and higher capital spending.
- Public debt: 20 percent of GDP.
- Government deposits at the central bank have been significantly depleted.
- FY2024: fiscal deficit projected to widen further to 6 percent of GDP, reflecting a further decline in mineral revenues and higher capital expenditure.
- Authorities’ plan: achieve a fiscal surplus by FY2026.
- IMF recommendations:
  - Some fiscal relaxation is warranted in 2024 given the fall in mineral revenues.
  - Execution of the ambitious capital budget should be slowed down to contain deterioration of the deficit and prioritize projects with the highest returns.
  - Medium-term consolidation, in line with the authorities’ plan to achieve a fiscal surplus by FY2026, is critical to stop the depletion of financial buffers, build resilience against shocks, and preserve fiscal sustainability.

### External sector
- Despite the weak diamond market, the external position improved in 2023 because of strong customs union revenues.
- Current account deficit is projected to widen in 2024 given weak diamond exports, followed by a rebound next year.
- Rebound in the external position is predicated on a recovery in the diamond market and continued elevated customs union transfers.

### Financial sector and structural policies
- Financial sector described as sound and stable despite the economic downturn.
- IMF recommends faster implementation of 2023 Financial Sector Assessment Program recommendations and operationalization of new regulations and laws to further reduce financial sector risks.
- To accelerate growth and job creation, policy priorities include:
  - Fundamental shift towards greater private sector participation.
  - More diversified export base.
  - More efficient public sector.
  - Reform of state-owned enterprises.
  - Improved infrastructure for doing business (internet, energy, logistics).
  - Trade facilitation measures.

### Closing remarks
- IMF mission thanked the authorities for the highly constructive dialogue during the Article IV consultation.

*IMF Staff Completes 2024 Article IV Mission to Botswana — Press Release No. 24/270 (July 12, 2024)*

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## References

- [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)
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_Source: https://www.imf.org/en/news/articles/2024/07/12/pr-24270-botswana-imf-staff-completes-2024-article-iv-mission_