Botswana’s current account on the red

16 Sep 2019


Botswana’s current account recorded a deficit of P815 million in the first quarter of 2019, compared to a deficit of P330 million in the first quarter of 2018, data contained in the latest Monetary Policy Report of the central Bank shows.

According to Bank of Botswana’s August MPR, “The larger deficit was due to negative balance in merchandise trade and income account balance during the period”.

The BOB August MPR further state that the negative trade balance was mainly attributable to an increase of 23.3 percent in diamond imports. This is in comparison to an increase of 9.5 percent in diamond exports. On the other hand, the increase in diamond imports was due to diamonds aggregation activities, which includes the importation and re-exportation of the diamonds.


The central bank said that in general, persistent current account deficits, mainly fuelled by consumption rather than productive investment expenditure may be detrimental to the macroeconomic stability of the country.

“However, in the case of Botswana, there is a large component of developmental and capital imports that should support future growth prospects”, the MPR noted.

Botswana’s negative balance in the income account is reported to have resulted from an increase in payment of investment income in the form of, among others, dividends and interest to foreign investors than receipts by locals from their investments abroad.

The BOB Monetary Policy Report comes hardly a few weeks after another report published by UK Based firm - Fitch Solutions which forecast that Botswana's fiscal balance will remain in deficit over the decade to 2028.

Fitch Solutions’ Country Risk report however noted that Botswana’s revenue growth will remain relatively robust in the years ahead, supported by mining taxes.

“We forecast government revenue to grow on average by 6.8 percent a year between 2019 and 2028”

The firm said that Botswana’s mineral revenues will decline over the short term amid decreasing diamond mine production.

“Our core view is that strong demand from China and India will help support mineral revenues over the longer term, but headwinds facing the global economy could potentially weigh on external demand. Revenues from the Southern African Customs Union (SACU) should provide some support, although sluggish growth in the region's largest economy, South Africa, will act as a constraint,” reads the research note.

On the other hand, Botswana’s expenditure growth is expected to be sustained by the government's NDP 11 development programme and any successor measure; whereas total government spending is expected to rise on average by 5.9 percent between 2019 and 2028.

Government expenditure as a percentage of Gross Domestic Product is expected to follow a declining trend from 32.4 percent of GDP in 2017 to 27.8 percent by 2028.