The World Bank in Botswana

Botswana is located at the center of Southern Africa, positioned between South Africa, Namibia, Zambia, and Zimbabwe. One of the world’s poorest countries at independence in 1966, it rapidly became one of the fastest-growing economies. Significant mineral (diamond) wealth, robust institutions, prudent economic management, and a relatively small population of about 2.5 million (2022), have made it an upper-middle-income country with an aspiration of becoming a high-income country. 

Political Context

Botswana’s stable political environment includes a multi-party democratic tradition, with general elections held every five years. The ruling Botswana Democratic Party (BDP) has been in power since independence. In October 2019, Botswana held its 11^th general elections, with President Mokgweetsi Eric Masisi assuming the presidency. The next election is scheduled for October 2024.

Economic Overview

Botswana’s macroeconomic policy framework is anchored in prudent macroeconomic policies and robust economic institutions, particularly around managing diamond revenue. It has contributed to a long period of positive economic growth. But Botswana's reliance on diamonds and a public sector-driven model have made the economy vulnerable to external shocks, as diamonds contribute over 90% of total exports and are a major source of fiscal revenues. The latest example was the impact of COVID-19 in 2020 when the economy contracted by 8.7%. But it has since rebounded strongly supported by the easing of the pandemic and favorable external demand for diamonds. Inequality in Botswana remains among the highest in the world, job creation lags, and unemployment is structurally high at 25.4% (end of 2022).

The World Bank projects economic growth to reach an estimated 6.5% in 2022. Amidst waning global growth and the projected stabilization of diamond prices, growth is expected to moderate to about 4.0% in 2023, driven by the diamond sector and the non-mining sector largely through services as increments in public sector wages drive demand in the retail sector.

Inflation remains elevated. It increased sharply to a decade-high of 12.2% in 2022 (from 6.7% in 2021) triggered by an upward adjustment of administered prices, a modest recovery in domestic demand, and higher international food and fuel prices emanating from supply chain shocks. Bank of Botswana tightened monetary policy in 2022, raising the newly introduced Monetary Policy Rate by a cumulative 151 basis points. It projects inflation to fall between the 3-6% objective range by the second quarter of 2024.

Fiscal pressures are expected to remain significant amid elevated capital and current spending. The overall fiscal deficit narrowed to an estimated 2% of GDP in 2022 and public debt reached an estimated 20.8% of GDP. The fiscal deficit is set to widen, with higher government spending to cushion households against higher inflation and protect the most vulnerable. Improving the efficiency of public spending and reorientating expenditures toward investment and human capital to raise productivity, create jobs, and diversify the economy by expanding the modest private sector remains key.

Social Context

Botswana continues to face structural challenges, slow growth, and shock from the COVID-19 pandemic. The Botswana Multi-Topic Survey: Labour Force Module Report indicates the unemployment rate rose to 26% in 2021, with youth unemployment posing a critical challenge for the country. Addressing this and other challenges will require improving the quality of infrastructure (water and electricity), essential basic services (education, health, and social safety nets), and accelerating reforms to the business environment, and providing effective support for entrepreneurship and private-sector job creation. The  World Bank’s Human Capital Index (HCI) scores  Botswana at 0.42 (2020). A child born in Botswana today will be 41% as productive when he/she grows up as he/she could be if he/she enjoyed complete education and full health. This is slightly higher than the average for the Sub-Saharan Africa region but lower than the average for Upper Middle-Income countries. Education expenditure in Botswana is among the highest in the world and includes the provision of nearly universal free primary education, but it has not created a skilled workforce.

Last Updated: Mar 28, 2023

The World Bank’s Country Partnership Framework (CPF) for the period of FY16–FY21 has expired, and a new CPF will be prepared soon. The last CPF was developed in close alignment with the government’s National Development Plan 11 (NDP 11) and Botswana’s Vision 2036 goals. The CPF supported Botswana’s development goals by focusing on three pillars: (i) promoting private sector-led, jobs-intensive growth; (ii) strengthening human and physical assets; and (iii) supporting effective resource management. The next CPF, beginning FY24, will be designed to support the Transitional National Development Plan (March 2023 – March 2025) and NDP12 from April 2025.

The International Finance Corporation (IFC) supports private sector-led growth and economic diversification in Botswana. It has ongoing engagements in sectors such as financial, renewable energy, water, tourism, health, and education.

The Multilateral Investment Guarantee Agency (MIGA) also supports Botswana’s development through the provision of political risk insurance to promote foreign investments in Botswana.  

Last Updated: Mar 28, 2023

• Programmatic Economic Resilience and Green Recovery Development Policy Loan I (DPO) ($250 million): The World Bank’s first budget support operation in Botswana was approved in FY21, following the economic crisis caused by the COVID-19 pandemic. The financing provided support for the government’s response to the pandemic, with a focus to strengthen private sector development and promote a resilient, green recovery.
• Integrated Transport Project  ($186 million): The World Bank supported the government ’s efforts to improve and modernize its transport infrastructure system. The project introduced an Output-and Performance-Based Road Contracting (OPRC) method to build and maintain an estimated 335km road network, improved urban infrastructure investments in Greater Gaborone, and supported technical studies on urban planning.
• Morupule B Generation and Transmission Project:  The WBG has provided a partial credit guarantee of $242 million under the Morupule B Generation and Transmission project to extend the maturity of the commercial loan to the government to 20-year period until 2030.

KNOWLEDGE ACTIVITIES

• E-Learning, Curriculum Development, and Capacity Building ($1.95 million): The World Bank has been supporting the Botswana Public Sector College through an advisory service since November 2020. The support has assisted in the design of an e-learning strategy, curricula development, and the roll out of an e-learning platform to train public servants.
• Through the Energy Diversification and Electrification activity, the World Bank supported the development of the Renewable Energy Roadmap for Botswana.
• Roadmap for Sustainable Livestock Value Chain in Southern Africa (Botswana and Namibia). The study developed a roadmap for investment in sustainable livestock value chains in Southern Africa. The assessment included: (i) sector analysis of animal-source food systems; (ii) market analysis for animal-source foods; (iii) and analysis of binding policy and investment constraints.
• Country Private Sector Diagnostic (CPSD) and Digital Economy Diagnostics:  The Botswana CPSD assessed opportunities for, and constraints to private sector-led growth, and highlighted three sectors: energy, water, and tourism. The Digital Economy Diagnostics (DE4A) for Botswana provided a comprehensive assessment of digital development, that includes the following aspects: (i) Digital Infrastructure; (ii) Digital Public Platforms; (iii) Digital Financial Services; (iv) Digital Business; and (v) Digital Skills.
• IFC Kgalagadi Bond ($25 million):  In late 2017, the IFC became the first non-resident entity to issue AAA-rated local currency debt in Botswana. The Bond met with strong demand, leveraging approximately 258 million Pula (about $25 million) to promote financial inclusion through the Botswana Building Society (BBS).
• The Economic Diversification and Competitiveness Reimbursable Advisory Service Program (RAS) ($3.6 million): The program provided support to encourage economic diversification through doing business reforms, entrepreneurship, secured transaction reform, and analysis of labor market skills gap.
• Strengthening Public Sector Performance RAS ($5.05 million):  The program supported implementing a monitoring and evaluation system linked to the government’s development plan, NDP 11, public investment management and procurement, and public service analytical work.
• ·       Social Protection Modernization: From 2013 - 2020, the World Bank supported the government through trust-funded technical assistance to develop a national social protection framework, design poverty-based targeting methodology, design, and pilot social registry, and develop a generic Management Information System customized to an ongoing government program.

Last Updated: Mar 28, 2023

Botswana joined the IBRD and IDA in 1968, 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. MIGA also supports the country’s competitiveness agenda through the provision of political risk insurance, when it is needed by foreign investors active in the country. 

Last Updated: Oct 07, 2022