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 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 (UMIC) with an aspiration of becoming a high-income country. But growth has slowed in recent decades. The economy is still reliant on mineral revenues, and productivity has declined.  Poverty and inequality remain high, compared to other middle-income countries.

Political Context

Botswana has a peaceful multi-party democratic tradition, with general elections held every five years. The latest elections took place on October 30, 2024, and led to a change of the ruling party.  For the first time in Botswana, since its independence in 1966, the long-time ruling party, the Botswana Democratic Party (BDP), was voted out of office. The election was followed by a peaceful transition of power to a new administration led by President Duma Boko of the Umbrella for Democratic Change (UDC). The UDC government in power since November 2024 has advocated a human rights-centered approach to governance.

Economic Overview

Botswana's macroeconomic framework, historically anchored in prudent fiscal management and robust institutions for diamond revenue governance, sustained prolonged growth for nearly four decades since its independence in 1966. However, structural vulnerabilities persisted due to overdependence on diamonds (over 90% of exports) and a public sector-led model, amplifying exposure to global shocks.

The economic slowdown to 3.2% growth in 2023 deepened in 2024 (3.1% projected contraction), driven by weakened diamond demand and production declines, though a rebound to 3.2% is anticipated by 2025 as markets recover. Inflation eased sharply to average 2.8% in 2024, prompting cumulative rate cuts of 75 basis points to 1.9%, below regional averages to stimulate activity amid a negative output gap.

Fiscal pressures intensified, with the 2024 deficit reaching an estimated 9% of GDP due to elevated spending, pushing public debt to 27.4.% of GDP in 2024. Employment remains skewed toward low-productivity sectors, with unemployment at 27.6% and extreme inequality (Gini index: 53.3). Climate shocks especially droughts, threaten livelihoods, underscoring the urgency of adaptation investments. While diamond revenue may improve, challenges linger in implementing reforms to attract private investment, and improve efficiency of public spending to drive inclusive, resilient growth.

Social Context

Living conditions have steadily improved since independence as the wealth from diamond discoveries has helped lay the foundations for growth and development. Social services delivery has expanded to provide large parts of the country with clean water, electricity, and sanitation. Basic education and health outcomes have steadily improved.

But the extractives-driven growth model is reaching its limits to further sustain poverty reduction and inclusive growth. Poverty and inequality levels have stagnated since 2010. Botswana’s extreme poverty rate for 2023 (13.5%) is more than four times higher than comparators at similar GDP levels. Unemployment rate remains high at 23.6%.

The government has invested significant resources in human capital development through education, health, and social protection. Government spending as share of GDP on health is 4.8%, education, 7.1%, and social protection, 2.6%, very high compared to neighbors in the region.

Nevertheless, human capital outcomes are not consistent with spending levels. Botswana currently scores only 0.41 on the WB’s Human Capital Index (HCI). This implies that a child born in 2020 will only be 41% as productive when he/she grows up as could be if he/she had enjoyed complete education and full health. Critical indicators such as stunting, child mortality rates, learning outcomes, and adolescent fertility rates are below what is expected of a UMIC.

Last Updated: Apr 09, 2025

A new World Bank Group Country Partnership Framework (CPF) for Botswana for the period of FY26–FY30 is under preparation. The Botswana Systematic Country Diagnostic (SCD) Update was completed in 2023. The next CPF will be designed to support the next National Development Plan 12, expected in October 2025.

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

The Multilateral Investment Guarantee Agency (MIGA) supports Botswana’s development through the provision of political risk insurance to promote foreign investments in Botswana, with projects in the financial sector to promote financial inclusion. 

Recent approved project:

Renewable Energy Support and Access Accelerator ($88m): Approved by the Board in July 2024, the project aims to enable renewable energy grid integration in Botswana and improve electricity service in selected rural areas. This new World Bank project will finance the necessary grid investment and Botswana’s first 50MW utility-scale battery energy storage system to enable the first wave of 335MW renewable energy generation to be smoothly integrated and managed in the grid. The project is co-funded by Global Climate Fund ($32 million).

Last Updated: Apr 09, 2025

Water Security and Efficiency Project  ($145.5 million): The World Bank supports Botswana in its efforts to increase the availability of water in drought-vulnerable areas, develop wastewater management in selected systems, and strengthen capacity in drought risk management and resilience. To date 117,119 people have been provided with access to improved water sources of which 62,443 are women. 

The International Finance Corporation (IFC) has invested in the 120 MW Mmadinare solar complex, constructed by the renewable developer Scatec. The project is the country’s first utility-scale Independent Power Producer project, and IFC’s first infrastructure investment in Botswana. The first phase of 60MW was commissioned in February 2025, and the second phase of 60MW is to be commissioned by September 2025. IFC and the First National Bank of Botswana, acting through its Rand Merchant Bank (RMB) division, are financiers of the project.  

In 2022, IFC also approved a local currency loan of up to $40 million equivalent for Peo Finance, to provide access to finance through digital channels to underserved individuals and scale up microloans for agricultural or home improvement activities.

The Multilateral Investment Guarantee Agency (MIGA) has supported climate finance and financial inclusion through the financial sector in Botswana. MIGA has issued a political risk insurance guarantee to a regional commercial bank to cover its equity investment in its subsidiary in Botswana to expand its lending operations.

MIGA also provided a credit enhancement to an international commercial bank loan to support Botswana Development Corporation (BDC). The loan allows BDC to lend to climate finance projects, and to provide financing to businesses operating in key industry sectors aligned with Botswana’s National Adaptation Plan Framework.

Botswana remains eligible for MIGA’s credit enhancement product, which can support infrastructure development in the country.

KNOWLEDGE ACTIVITIES

Drivers of Inclusive Growth analyzed Botswana’s growth performance over the past decades and highlighted the critical need for productivity-led inclusive growth to get out of the “Middle-Income Trap” and achieve Botswana’s ambition towards a high-income country. It presents a set of determinants that underpin the drivers of inclusive growth, and shared a set of examples of how other countries have addressed similar challenges.  

Poverty Assessment used available data to present poverty estimates up to 2016 and preliminary poverty projections based on imputations into 2019-2022 quarterly data. It also used satellite and geospatial to understand recent trends in electricity access and water crises.

Botswana Human Capital Note - Investing in Human Capital in Botswana – A Framework for a Coordinated Multi-Sectoral Approach.  The policy note used the lifecycle framework to undertake an in-depth diagnostic of human capital development in the country.

Last Updated: Apr 09, 2025

The World Bank works closely with partners across the society in Botswana. It enjoys close ties with the private sector to facilitate a more friendly business environment and promote private investment. It has also intensified engagement with civil society organizations, academia, and think tanks such as the Botswana Institute for Development Policy Analysis.

With other development partners, the World Bank is part of the United Nations Country Team and interacts regularly with other international partners such as the African Development Bank, the International Monetary Fund, and bilateral partners and agencies.

Last Updated: Apr 09, 2025