Foreign reserves up 20% on strong SACU receipts

Botswana’s foreign exchange reserves strengthened significantly in the second quarter of 2026, rising by more than a fifth to P55.9 billion from P46.3 billion in the corresponding quarter of 2025.

The Bank of Botswana (BoB), in its September 2026 External Sector Statistics Bulletin, attributes the increase to inflows from Southern African Customs Union (SACU) revenues, dividends and royalties from diamond sales, as well as gains from price and exchange rate movements.

The bulletin analyses developments in Botswana’s external sector between the first quarter of 2025 and the first quarter of 2026, with particular focus on the current account and foreign exchange reserves.

The improvement in reserves was also reflected in import cover, which increased from 6.1 months in the first quarter of 2025 to 7.3 months in the first quarter of 2026.

“The import cover remained well above the Southern African Development Community (SADC)’s macroeconomic convergence threshold of three months throughout the period, indicating adequate reserve coverage,” BoB said.

“Similarly, the ratio of foreign exchange reserves to GDP increased from 71.5 percent to 76.5 percent over the same period, reinforcing the improvement in Botswana’s external buffer position at the end of the first quarter in 2026.”

BoB also reported an improvement in Botswana’s external sector position in the first quarter of 2026, as the current account deficit narrowed significantly, mainly due to an improved primary income balance and continued inflows into the secondary income account.

The improvement was partly offset by a deterioration in the merchandise trade balance, as imports exceeded exports.

The composition of trade continued to reflect the structural characteristics of Botswana’s external sector, particularly its dependence on mining, with diamonds remaining the principal source of export earnings.

“At the same time, the significant increase in diamond imports reflected Botswana’s role as a regional diamond trading and aggregation hub,” the central bank said.

What experts say

Commenting on the developments, economist Lame Bothata said the figures offered several positive indications about the economy, noting that foreign exchange reserves were strategically important.

He said the 8.7 percent economic growth recorded in the second quarter, driven particularly by diamonds, was significant for the country.

“The economy is picking up. There could be much improvement in the last quarter of the year. For foreign reserves to be strengthening, it would also improve investor confidence in the medium to long term,” Bothata said.

He said the prolonged decline in diamond revenues, coupled with steady imports and the absence of other strong foreign currency earners, had contributed to the decline in reserves in previous months.

Bothata added that ongoing infrastructure projects undertaken by the government, international partners and funders could stimulate economic growth and create jobs, thereby strengthening household livelihoods.

Current account narrows

Meanwhile, BoB reported a significant narrowing of the current account deficit, an indicator of flows of goods, services, primary income and secondary income between residents of a country and non-residents.

The deficit narrowed from P1.1 billion in the first quarter of 2025 to P31 million in the corresponding period of 2026.

According to the central bank’s statistical bulletin, the improvement was largely driven by the primary income account, which shifted from a deficit of P1.6 billion to a surplus of P85 million over the same period.

The surplus was supported by a substantial decline in investment income payable to foreign investors, alongside a slight increase in investment income earned by Botswana residents.

The secondary income account also contributed to the improvement, with its surplus increasing from P7 billion to P7.1 billion, driven by higher remittance receipts.

The non-mining current account also improved significantly, with the deficit narrowing from P12.2 billion, equivalent to 20.7 percent of GDP, to P6.7 billion, or 10.6 percent of GDP, in the first quarter of 2026.

“This was due to a significant drop in the value of non-mining imports from P18.8 billion in the first quarter of 2025 to P15.3 billion in the corresponding period in 2026,” BoB said.

“Despite this improvement, the persistent deficit in the non-mining current account highlights Botswana’s continued reliance on the mining sector to support its external position.”