Chamwe Kaira
The International Monetary Fund (IMF) has warned that Botswana’s interest in increasing its stake in De Beers could heighten economic risks, given fiscal pressures and the country’s heavy reliance on the diamond sector.
The fund said Botswana could achieve stronger economic outcomes by adopting a broad adjustment strategy that combines fiscal consolidation with structural reforms aimed at diversifying the economy. Such measures, the IMF said, would help support growth, contain public debt and protect international reserve buffers.
The IMF highlighted uncertainty in the global diamond market, pointing to the rapid growth of lab-grown diamonds. While lab-grown diamonds are chemically and physically identical to natural stones, wholesale prices have fallen by about 90% since 2019, driving expansion, especially in the United States.
The Fund said continued price declines could eventually reduce retailers’ incentives to promote lab-grown diamonds, which may ease competition for natural diamond producers over time.
Despite this, the IMF warned that Botswana’s outlook faces major downside risks. These include ongoing weakness in the global diamond market and repeated delays in fiscal consolidation.
The risks are heightened by the government’s stated interest in increasing its 15% stake in De Beers.
The IMF advised against this move, citing fiscal constraints and Botswana’s high dependence on diamond revenues.
The Fund said that if export risks materialise, authorities may need to introduce further fiscal consolidation and allow a faster pace of currency depreciation to help absorb external shocks.
Demand for natural diamonds is expected to recover gradually over the medium term, with a sustained rebound likely from 2026.
The IMF said major producers expect marketing efforts that differentiate natural diamonds from lab-grown alternatives to support the recovery.
The recovery is expected to be slow.
The IMF said diamond output will increase gradually due to global uncertainty and the impact of United States tariffs, including a 15% tariff on Botswana and an average 28% trade-weighted tariff on countries exporting polished Botswana diamonds.
The IMF has revised down its medium-term outlook for Botswana’s diamond sector compared with last year, when it had expected a sharp recovery in exports in 2025.
The weaker outlook has led to lower projections for export earnings, terms of trade and overall economic growth.
According to the IMF, the pace of recovery will depend on fiscal consolidation and progress on economic diversification. Under the baseline scenario, which assumes no further tightening beyond recent austerity measures and limited reform of the business environment, non-mineral growth is expected to recover slowly and remain below the pre-pandemic average of 5.1%.
Inflation is projected to stabilise near the midpoint of the Bank of Botswana’s target range, while the current account deficit is expected to narrow as diamond exports recover.
The IMF warned that without further policy action, public debt could rise sharply and international reserves could continue to decline. Under the baseline scenario, public debt is projected to reach nearly 60% of gross domestic product by 2030, while reserves are expected to fall over the medium term despite some recovery in mineral revenues.
