Botswana

Botswana is a landlocked country at the heart of Southern Africa. Once among the world’s poorest nations, well-managed diamond wealth improved its economy and people’s living conditions. With a population of 2.5 million (2022), it is now an upper-middle-income country (UMIC). However, poverty and inequality persist at higher levels than in comparable middle-income countries. In 2023, extreme poverty stood at 13.5%, four times higher than peers at similar GDP levels, and unemployment at 27.6%. The extractives-driven public sector-led growth model is reaching its limits in further sustaining growth and poverty reduction.

Politically, Botswana is known for its stability and democratic traditions, with elections held every five years. Elections on October 30, 2024, led to a change, when the ruling Botswana Democratic Party lost power for the first time since independence in 1966. The Umbrella for Democratic Change, a four-party coalition, led by President Duma Boko, assumed office in November 2024.

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Botswana’s economy, which is highly dependent on diamonds (over 90% of export earnings) and anchored by a large public sector, showed sustained growth over several decades. However, this economic structure has become increasingly constrained and revealed weaknesses in macroeconomic management and institutions. Structural vulnerabilities have been amplified by recent external shocks, underscoring the limits of the current model and the need to accelerate diversification and private‑sector‑led growth.

Growth is projected to remain subdued in 2025, with a further marginal contraction as diamond demand recovers only gradually. A modest recovery is expected in 2026, with growth rebounding to an estimated 3.1%, supported by a partial normalization of diamond production, though output is projected to remain below historical averages over the medium term.

Fiscal pressures have intensified amid weak growth and declining mineral revenues. Public debt increased to just under the debt limit of 40% of GDP in 2025 and is projected to rise rapidly and breach that ceiling, reflecting persistent fiscal deficits driven by rigid expenditure and financing constraints. Fiscal deficits remain elevated, underscoring the urgency of credible fiscal consolidation through expenditure rationalization and revenue‑enhancing measures. Inflation eased amid subdued domestic demand but is expected to rise in the near term, reflecting higher energy costs, exchange‑rate pass‑through, and vulnerability to commodity price shocks. Employment remains skewed toward low-productivity sectors, with unemployment at 27.6% reflecting structural labor market issues, limited private sector opportunities, and extreme inequality (Gini index: 53.3). Inequality is persistent, and human capital outcomes require enhancement through better education, healthcare, and social protection reforms.

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The structural constraints in Botswana's economy are becoming evident in limited private sector development, human capital accumulation, infrastructure investments, and public sector effectiveness.

Improving the business environment for the private sector remains critical to drive foreign and domestic investment and support for entrepreneurship, business development, and diversification of the private sector. The latest Business Ready Indicators reveal inadequacies in the public services that promote market competition, and inefficiency in implementing the regulatory framework. This hampers productive private sector investment and job creation.

Human capital outcomes in Botswana are not consistent with spending levels. Botswana invests significant public resources in human capital through education, health, and social protection. Government spending on health amounts to 4.8% of GDP, education to 7.1%, and social protection to 3.8%, high percentages compared to regional neighbors. However, Botswana currently scores only 0.41 on the WBG’s Human Capital Index (HCI). This implies that a child born in 2020 will only be 41% as productive in adulthood as a complete education and full health would have allowed her/him to be, on a par with the average in Sub-Saharan Africa. Women's labor force participation (60%) lags behind men's (70%), and the female Not in Employment, Education or Training (NEET) rate of 40% significantly exceeds the male rate (34%).

Botswana is highly vulnerable to the impacts of climate change, particularly drought and flooding, which are becoming more frequent and severe. Climate change-related shocks include floods (55.6%), drought (22.2%), epidemics (16.7%), and storms (5.6%). The country faces challenges with water security, climate resilience, and water and sanitation services. Agriculture’s contribution to GDP has significantly declined, with cattle rearing representing two thirds of agricultural output.

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A new World Bank Group Country Partnership Framework (CPF) for Botswana is under preparation. The CPF will be designed to support the National Development Plan 12 and the Botswana Economic Transformation Programme (BETP). The Botswana Systematic Country Diagnostic Update was completed in 2023, and will be updated in FY26.

As of March 2026, the portfolio includes three World Bank lending operations on water, energy, and health, with a total commitment of $273.5 million. Lending is complemented by trust funds to the tune of $3.8 million for health and energy. In addition, there is a Reimbursable Advisory Service Program to support developing the national gender policy.

Partners include the International Monetary Fund (IMF), United Nations, African Development Bank (AfDB) and Southern African Development Community.

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The Water Security and Efficiency Project ($145.5 million) supports efforts to increase availability of water in drought-vulnerable areas, develop wastewater management systems, and strengthen capacity in drought risk management and resilience. Three water supply schemes were supported, delivering improved water services to 121,647 beneficiaries (of which 62,443 are women) since completion in February 2022 and May 2023. The Boteti Cluster Water Supply Scheme (started in 2024) is now operational and supplying 22,000 beneficiaries at 2750m³/day.

The 100MW Mmadinare Solar Project, the country’s first utility-scale Independent Power Producer (IPP), became operational in December 2025. The plant’s installed capacity meets about 7% of the country’s electricity demand. IFC financed the project, built and managed by Scatec from Norway, for $80 million ($38m IFC and $42m mobilized from South Africa's Rand Merchant Bank). The Botswana Power Corporation competitively awarded the project.

Knowledge Products

The Gender Assessment-Trends and Opportunities to Advance Gender Equality Report analyzed and recommended  solutions to Botswana’s gender equality challenges, including women's low political representation, a large gender gap in labor participation, and high gender-based violence (GBV) rates.

The Country Economic Memorandum: Drivers of Inclusive Growth analyzed Botswana’s growth performance and highlighted the need for productivity-led inclusive growth to get out of the “Middle-Income Trap” and achieve Botswana’s ambition of being a high-income country.

The Health Public Expenditure Review (PER) assesses health financing and system performance to inform improvements in the efficiency, equity, and sustainability of health spending. It analyzes public health expenditures, examining the extent to which spending is translated into desired health outputs and outcomes. It also assesses the scope for optimizing resource allocation and strengthening reliance on domestic financing.

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