Botswana’s famed economic miracle is showing signs of fatigue, with the country’s growth model struggling to adapt to shifting global realities, the International Monetary Fund (IMF) has warned.
Delivering the keynote address at the Bank of Botswana’s 50th Anniversary Symposium, Abebe Aemro Selassie, Director of the IMF’s African Department, praised Botswana’s development achievements but said the foundations of its success have weakened.
“Botswana’s economic model has lost momentum. The very drivers that propelled its success are showing diminishing returns,” Selassie said, noting that the diamond-dependent economy faces declining revenues, mounting fiscal pressures and rising unemployment.
He said returns on both physical and human capital had fallen while structural transformation had stalled. “The shift from agriculture to higher productivity sectors has plateaued, and mining revenues — once the engine of fiscal surpluses — are under threat from both cyclical and structural pressures, including competition from lab-grown diamonds.”
Selassie also cited worsening vulnerabilities linked to climate change, which has intensified drought cycles and hurt rangeland productivity. Progress on competitiveness, human development and governance has slowed, while the efficiency of public investment has declined.
One of the most pressing challenges, he said, is the dominance of the state in the economy. With the public wage bill consuming more than 13 percent of GDP — equal to 58 percent of total tax revenues — resources that could stimulate private investment are being crowded out. State-owned enterprises continue to dominate key sectors, limiting competition and stifling entrepreneurship.
“This limited private sector development is reflected in persistently high unemployment, particularly among youth, where joblessness has hovered above 35 percent,” Selassie said. “The lack of robust employment opportunities outside the public sector underscores the urgency of structural reforms.”
He warned that Botswana’s macro-fiscal buffers are eroding as diamond revenues weaken, leaving the country more vulnerable to external shocks. Poverty reduction has stalled, and middle-class expansion has slowed.
To secure the next phase of prosperity, Selassie urged Botswana to adopt a forward-looking strategy centered on services-led growth, arguing that leveraging institutional strengths and human capital could help drive diversification and create more inclusive opportunities.
“Botswana must act quickly to address these weaknesses and fragilities,” Selassie said. “Failure to adapt could risk larger socioeconomic crises, as history has shown in other resource-dependent economies.”
The symposium marked five decades of the central bank’s operations, bringing together policymakers, economists and development partners to reflect on Botswana’s achievements and chart its economic future.
