GABORONE, June 24 (Xinhua) -- Bank of Botswana Governor Lesego Moseki on Wednesday called for urgent structural reforms to diversify the economy and rebuild fiscal buffers, as the country grapples with a protracted downturn in the diamond sector and mounting external pressures.
Speaking at the economic media briefing and providing information on the central bank's 2025 annual report in Gaborone, Moseki painted a cautiously optimistic picture of Botswana's economic position while warning that weaker global demand, geopolitical tensions and uncertainty in world trade have eroded the country's policy space.
"Lower mineral revenues have put pressure on government finances and the foreign exchange reserves," Moseki told journalists, stressing that this erosion underlines the urgency of restoring fiscal sustainability through decisive policy reform.
Despite the headwinds, the governor highlighted Botswana's solid economic fundamentals, including strong institutions, a stable financial system and prudent macroeconomic management, which have sustained the nation's investment-grade credentials.
The current environment presents an opportunity for transformation rather than merely a constraint, he said, urging the government, state-owned enterprises and the private sector to embrace productivity improvements and implementation discipline to diversify the economy.
"Structural transformation cannot be postponed until conditions improve," Moseki said, pointing to the Botswana Economic Transformation Program and National Development Plan 12 as critical frameworks for driving private sector-led growth.
The economy of the southern African country contracted by 2.8 percent in 2024 and 0.7 percent in 2025, with weakness concentrated in the diamond sector while non-mining activity proved comparatively resilient.
Domestic inflation is projected to spike to 9 percent in 2026 from an average of 2.7 percent in 2025, driven by higher fuel and transport costs, medical aid expenses and water tariff adjustments, according to the bank.
To address tightening liquidity, the Bank of Botswana raised its policy rate to 3.5 percent in October 2025 and subsequently to 5.5 percent in April 2026, and maintained 5.5 percent in June.
