The African Development Bank (AfDB) has approved a $304 million loan to support Botswana’s efforts to stabilise its public finances and implement key economic and governance reforms amid falling diamond revenues.

It marks a critical intervention in the country’s ongoing struggle with fiscal instability, primarily driven by a sharp decline in diamond revenues. This analysis examines the context, intent, and expected impact of the loan, as well as the broader economic challenges facing Botswana.

The loan aims to help Botswana navigate a widening fiscal deficit—expected to hit 6.7% of GDP this year—after the economy shrank by 1.7% in 2024, largely due to subdued global demand for diamonds, which account for around 80% of the country’s exports.

The $304 million loan is structured as a one-year general budget support operation for the 2025/26 fiscal year, under the Governance and Economic Resilience Support Programme (GERSP). The program is designed to address two main objectives:

Strengthening fiscal sustainability and transparency: Measures include boosting domestic revenue collection, curbing illicit financial flows, and enhancing the efficiency and accountability of public spending.

Stimulating inclusive economic growth: The program supports micro, small, and medium enterprises (MSMEs), with a particular focus on businesses owned by women and youth, to foster job creation and reduce inequality.