Botswana is a development success story. A small, landlocked country of two million people, Botswana was one of the poorest countries in Africa with a per capita gross domestic product (GDP) of about $70 when it gained independence from Britain in 1966. In the years that followed, supported by the discovery of diamonds, Botswana has been one of the fastest growing economies in the world and moved into the ranks of upper-middle income countries. Real GDP showed robust growth of average 5% per annum over the past decade.

The country has a mature democracy, with free and fair elections held regularly and the constitution provides for fundamental rights and freedoms. The Botswana Democratic Party (BDP) has been in power since the first elections were held in 1965. The BDP won the 2014 general election, and Lieutenant- General Seretse Khama Ian Khama was sworn in as President for a second term.

In contrast to Botswana’s impressive economic growth, good governance and prudent macroeconomic and fiscal management, the country faces high levels of poverty and inequality as well as low human development indicators. While poverty rates declined from 50% at independence to just over 19% today, significant pockets of poverty remain, especially in rural areas. Education expenditure is among the highest in the world, at around 9% of GDP and includes the provision of nearly universal and free primary education, however, the sector has not created the skilled workforce Botswana needs to diversify its economy. Unemployment has remained persistent at nearly 17.8%, and as a consequence, income inequality in Botswana is among one of the highest in the world. The HIV/AIDS pandemic has further exacerbated the situation; the HIV/AIDS adult prevalence rate remains at 22%, contributing to education and health outcomes that are below those of countries in the same income group.

Continued uncertainty in global markets and the slow pace of economic recovery in advanced countries continue to act as a drag on Botswana's economic outlook, mainly due to the country's heavy reliance on diamond exports. After two years of strong post-crisis growth, subdued global demand for minerals and metals in 2012 slowed real GDP growth considerably to around 4%. However, the economy bounced back in 2013 and 2014, with real GDP growing by 5.8% and 5% respectively and is expected to grow by a modest 4.2% in 2015. The main driver of recent growth has come from the diamond sector, with real mining value added up 23.9% in 2013. In 2014, however, mining grew by a modest 4.5% due to the weakening global demand for rough diamonds, whereas, growth in the non-mining private sector slowed to 4.3% – this continues its downward trajectory after growth of 6.9% in 2013, 7.4% in 2012 and 9.4% in 2011. Due to weakening economic activity, lower credit growth as well as lower fuel and commodity prices, inflation has remained around 3% in 2015 Q2.  This is at the lower bound of the Bank of Botswana’s 3-6% objective range. Accordingly, the Bank of Botswana lowered policy interest rates twice in 2015 (100 bps in February and 50 bps in August). The outlook for 2015-2017 is modest with expected growth rates of 3.2%, 3.8% and 3.9% respectively. This is due to falling demand for diamonds particularly in light of the slowdown in China, severe water and electricity constraints, as well as reduced credit growth due to higher household indebtedness. The Pula experienced a depreciation against the Euro in 2014 and 2015, reflecting divergence between major trading currencies. At end-2014, foreign exchange reserves stood at P70 billion, and had reached nearly P90 billion by April 2015.

The current account registered a strong surplus of almost 10% of GDP in the year to March 2014, following a small deficit in the previous 12 months. Exports of goods and services increased by 7.2% y/y in Q1 2015, with diamond exports increasing by 9.5% y/y in the same period. However, due to falling demand for rough diamonds, growth forecasts for total exports in 2015 are expected to be almost stagnant at 1%.

Botswana’s 2014-15 budget emphasizes tight fiscal management, prioritization, and a need to continue to rebuild fiscal buffers in the face of vulnerabilities in the country’s two main revenue streams (diamonds and the Southern African Customs Union (SACU) customs pool). After posting small surpluses in FY 2012/13 and 2013/14, the government projects a surplus of 2.4% of GDP in 2014/15, with total expenditure and net lending rising 22.6% from 2013/14 to a projected at 34% of GDP. Revenues are expected to be robust (up 12%), buoyed by higher minerals revenue (up 16.7%) and continued strong revenues from the SACU customs pool (up 16.7%). The medium-term fiscal framework, however, sees a shift toward greater emphasis on expanding domestic revenue base, reducing heavy reliance on SACU transfers, which reached a peak of almost 35% of revenue (12.6% of GDP) in 2012-13.

Botswana faces a key policy dilemma of how to grapple with the predicted decline in previously buoyant diamond revenues. Projections of future diamond revenues are uncertain. While diamonds may not be fully exhausted for another generation, output is already well past its peak. Over the past 20 years, While Botswana has made some progress in reducing its dependence on diamonds, but the level of economic diversification needed to offset diminishing mineral revenues will remains a challenge. 

Last Updated: Oct 08, 2015

 In response to increased interest from the Botswana government for a scaled-up WBG program, the country’s first Country Partnership Strategy (CPS) was presented to the World Bank Group’s (WBG) Board of Executive Directors in May 2009 and covered the period FY09 to FY13. The strategy developed in consultation with the Botswana government is linked to core national development priorities as set forth in Botswana’s long term development strategy “Vision 2016” and the National Development Plans (NDPs). A Systematic Country Diagnostics to inform a new Country Partnership Framework (CPF) for the period FY16 to FY20 was endorsed in March, 2015. This will align the WBG’s future program with the government’s development priorities.

As of September 2015, the WBG’s portfolio had two active projects:

In addition to the lending program, the WBG is undertaking analytical work to better understand the apparent contradiction between the strong track record in governance, macro-fiscal management and growth vis-a-vis high levels of poverty, inequality and human development indicators, and to continue identifying key bottlenecks to economic diversification. In support of the government’s economic diversification and competitiveness agenda, a reimbursable advisory services (RAS) project was signed in February 2013. The first assignment under the program covers five pillars jointly identified by government and the Bank, including doing business, industrial and trade policies, infrastructure, access to finance, and skills development. The second assignment started in February 2014 in response to government’s request for assistance with developing the Long Term Vision for Botswana, establishing national performance monitoring and evaluation framework, introducing continuous multi topic household survey, and implementing the supporting capacity building of Public Procurement and Asset Disposal Board.

Last Updated: Oct 08, 2015

The World Bank Group (WBG) arranged a partial credit guarantee under the Morupule B Electricity Generation and Transmission Project to extend the maturity of an $825 million commercial loan to Botswana from 15 years to 20 years. The project closed on June 30, 2014 as scheduled with the operational status of the plant as being fully taken over by Botswana Power Corporation and operating with all units. The plant was engaged at its full design capacity of 600MW for the first time on June 17, 2014. Nevertheless, concerns regarding plant’s performance and reliability remain. Also, the Bank is supporting analytical work for development of low-carbon energy alternatives such as coal bed methane and renewable energy, including concentrated solar power.

The WBG is bringing global and regional experience to increase the efficiency of the national HIV/AIDS program by supporting the government to transition from an “emergency” response to a broader, more strategic and sustainable approach. The WBG has also been able to leverage a contribution of $20 million from the European Commission using an innovative, performance-based “buy-down” structure to improve the performance of the National AIDS Coordinating Agency. This instrument relies on donor resources to lower the cost of an International Bank for Reconstruction and Development (IBRD) loan targeted at priority health activities. 

Last Updated: Oct 08, 2015

Botswana joined the International Finance Corporation (IFC) in 1979 and the Multilateral Investment Guarantee Agency (MIGA) in 1990. The International Finance Corporation (IFC) supports the competitiveness agenda through selective investment technical assistance interventions.

The MIGA will also support the country’s competitiveness agenda through the provision of political risk insurance, if and when it is needed by foreign investors active in the country.

Through the “buy-down” arrangement of the HIV/AIDS project, the European Commission has emerged as the Bank’s main partner with a substantive portfolio targeting a pressing development challenge of slowing the epidemic. The World Bank Group is also collaborating with the OPEC Fund for International Development (OFID) which is providing $30 million in co-financing for the Integrated Transport Project.

Last Updated: Oct 08, 2015


Botswana: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments