CEIC Data Blog

Botswana: High Deficit Suggests Diversification from Diamond Industry


MACRO WATCH – Middle East & Africa: In 2011, Botswana’s government deficit reached BWP 8,129.19 million. The figure represents 6.17% of nominal GDP, decreasing steadily from the 10.94% recorded in 2010. Although, the fiscal balance is improving compared to the previous year, it is still far below the values recorded before the crisis.

Government Revenues and Fiscal BalanceBotswana Deficit
Chart provided by: CEIC

The major concern for the economy of Botswana is always its over-dependence on the diamond industry. Global demand for diamonds is the major driver of the economy, and times of crisis reveal how hazardous this dependency can be. Diamond exports amount to 30% of GDP, and taxes collected from diamond sales amount to 30.8% of government revenues. In the past few years, Botswana turned from a country with stable fiscal balance to one recording substantial budget deficits. Decreasing diamond exports in 2008 and soaring government expenditures in an attempt to stimulate the economy have led to the negative fiscal balance.

Botswana, however, has kept its pace of economic growth, with a 7.8% increase in nominal GDP in the third quarter of 2011 on an annual basis. Nevertheless, the country’s strong dependence on the diamond industry is a challenge for the sustainable development of the country, and the government is seeking ways to diversify away from the precious stone.

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By Peter Chavdarov in Bulgaria – CEIC Analyst

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