Botswana’s recovery is expected to strengthen over the medium term, supported by a pickup in diamond demand, public investment, and structural reforms, the International Monetary Fund (IMF) has said.
Declaring risks to the positive outlook as “balanced”, the IMF says its baseline forecast for Botswana envisions macroeconomic stability and continued growth.
Official statistics shows that following a small contraction in 2015, the domestic economy recovered in 2016 with real GDP growth of 4.3 percent. Although mineral production has remained subdued through this year, diamond sales rebounded as conditions on the global market begun to improve.
Last week, the country’s leading diamond mining company, Debswana Diamond Company confirmed that it will re-open its Damtshaa mine at the beginning of 2018. The company which is jointly owned by the government of Botswana and De Beers Mining Company said that the decision to reopen the mine was guided by global demand projections.
In response to the market down turn in 2015, Debswana took a decision to optimise revenue and distributions by maximising production at core assets, scaling down production at lower value and lower margin assets.
As a result, the company then placed the Damtshaa mine on care and maintenance because of weak demand for diamonds. During the shutdown, Orapa Mine plant 1 was run at a reduced production level of approximately one million carats per year in order to maintain plant readiness to ramp up production.
Meanwhile domestic economic figures also shows that the non-mining activities also expanded, supported by what the IMF calls “accommodative fiscal and monetary policies”.
The official figures also shows that Botswana’s fiscal position has also improved as the deficit narrowed from 4.6 percent of GDP in fiscal year 2015/16 to about 1 percent of GDP in 2016/17. The outcome is said to have been supported by a recovery in diamond revenues and constrained recurrent spending. Higher diamond sales also contributed to a large surplus in the external current account and helped sustain a high level of international reserves (45 percent of GDP at end-2016).
