Botswana

Botswana is a landlocked country in Southern Africa. With a population of 2.5 million (2022), it is now an upper-middle-income country. However, poverty and inequality persist at higher levels than in comparable middle-income countries. In 2023, extreme poverty stood at 13.5% of the population, four times higher than peers at similar GDP levels, and unemployment at 27.6% of the labor force. The extractives-driven public sector-led growth model is reaching its limits in further sustaining growth and poverty reduction.

Following the October 2024 general elections, a new administration assumed office in November 2024 under the leadership of President Duma Boko. The government is led by the Umbrella for Democratic Change (UDC), a coalition of four political parties.

Botswana’s diamond wealth has supported decades of economic and social progress, but the country’s traditional growth model is under increasing pressure. Weaker demand for natural diamonds, greater competition from synthetic stones, and slow progress in developing other sources of growth have reduced export earnings and government revenue. This has made the economy more exposed to changes in the global diamond market and strengthened the case for a broader, more private-sector-led economy.

Economic activity is showing signs of recovery in Q1 2026, after contracting in 2024 and 2025. Growth is projected at 3.4% in 2026, supported by higher diamond production, electricity generation, and selected services. The recovery is nevertheless expected to remain moderate, as diamond sales and exports are still weak and household spending and investment have yet to regain momentum. Improvements in foreign exchange reserves and non-diamond exports are positive signs, but a stronger and more durable recovery will depend on increased private investment, more competitive exports, and steady implementation of reforms.

The economic outlook is also shaped by tighter public finances and rising living costs. The fiscal deficit remains large, while public debt is projected to almost breach the old 40 % of GDP threshold in 2026. The improved FY2025/26 fiscal result partly reflected a one-off central bank dividend and does not remove the need to raise more non-mineral revenue, contain recurrent spending, and improve the performance of public investment and state-owned enterprises. Inflation reached 10.7% in June 2026, driven mainly by higher fuel, food, and transport costs, adding pressure on household budgets. Poverty remains close to one fifth of the population, and high unemployment, especially among young people, continues to limit the benefits of growth.

The structural constraints in Botswana's economy are becoming evident in limited private sector development, human capital accumulation, infrastructure investments, and public sector effectiveness. Priorities are to restore sound public finances, protect essential services and vulnerable households, improve the business environment, strengthen infrastructure, and equip people with skills for new and better jobs.

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% 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, drought, and storms. The country also faces challenges with water security, climate resilience, and water and sanitation services.

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

As of September, 2026, the portfolio includes World Bank operations in health  energy, and education, with a commitment of $232 million. Following a request by the Ministry of Finance, a pipeline project to strengthen employment and social protection is under development. Lending is complemented by trust funds for $3.8 million in health and energy. In addition, there is a Reimbursable Advisory Service Program to support the development of  the national gender policy.

The Water Security and Efficiency Project ($145.5 million) supported 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, North-East Tutume; Selebi Phikwe-Serule and Boteti, are operational and delivering improved water services to 145,000 people (62,443 women). The Boteti Cluster Water Supply Scheme (started in 2024) is now operational and supplying 22,000 people at 2750m³/day.

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

The Botswana Health Emergency Preparedness, Response and Resilience Project ($43 million) supports health emergency preparedness and response and health system resilience, focused on strengthening digital public health infrastructure, enhancing supply chain management for medicines and supplies, improving health products regulatory capacity, and building institutional capacity to plan, detect, and respond to emergencies.

The government is pursuing an ambitious social protection and youth employment agenda aimed at creating jobs, raising productivity, and improving incomes for poor and vulnerable households. Policy reforms are focused on strengthening pathways into productive employment, entrepreneurship, and sustainable livelihoods, particularly for youth, women, and social assistance beneficiaries. The government is modernizing social protection delivery systems through the development of a Single Social Registry, improved targeting mechanisms, and stronger interoperability across programs, helping to ensure that public resources are directed more effectively to those most in need.