Cash-Strapped Govt Borrows P4.1 Billion from AfDB Amid Escalating Debt

Botswana’s borrowing spree has taken another leap after the government secured a P4.1 billion loan from the African Development Bank (AfDB), raising concerns over the country’s deepening reliance on external and domestic financing amid persistent fiscal challenges.

The new facility, equivalent to about $300 million, comes as the country grapples with budgetary pressures, sluggish economic recovery, and ballooning expenditure. The AfDB loan is intended to support government reforms aimed at improving public service delivery and restoring fiscal stability.

The AfDB confirmed it has approved a $304 million loan to help Botswana manage mounting fiscal challenges and implement key governance and economic reforms. The funding, approved by the Bank Group’s Board of Directors, will finance the Governance and Economic Resilience Support Programme (GERSP), a one-year general budget support operation for the 2025/2026 fiscal year.

According to the bank, the facility is designed to cushion Botswana from the financial shock triggered by falling diamond revenues while promoting reforms to improve fiscal transparency, strengthen revenue collection, and support private sector-led growth.

Botswana’s economy contracted by 1.7 percent in 2024, largely due to weak global demand for diamonds, which account for roughly 80 percent of the country’s exports. The fiscal deficit widened from a balanced budget in 2022/2023 to 4.7 percent of GDP in 2023/2024 and is projected to reach 6.7 percent in the current fiscal year.

“This operation comes at a critical time for Botswana,” said Moono Mupotola , Deputy Director General for Southern Africa and Country Manager at the African Development Bank Group. “We will work with the new administration to implement reforms that will deepen fiscal sustainability, strengthen transparency, and create a more business-friendly environment for economic diversification.”

The bank said GERSP is built around two main pillars: strengthening fiscal sustainability and transparency, and stimulating economic growth. The programme includes measures to increase domestic revenue mobilisation , curb illicit financial flows, and improve efficiency and accountability in public spending.

It also targets support for micro, small, and medium-sized enterprises, particularly those led by women and youth, with the aim of creating jobs and reducing inequality. The operation is seen as a transitional measure to address short-term budget pressures while the AfDB engages Botswana’s new government, elected in November 2024, on long-term development goals.

“The African Development Bank is committed to supporting Botswana’s ambitious socioeconomic development agenda through credible and transformational reforms, project and program financing, and continuous policy dialogue,” said Abdoulaye Coulibaly, the bank’s Director of Governance and Economic Reforms.

This latest loan builds on the AfDB’s prior support to Botswana, including the Economic Recovery Support Programme implemented in 2021–2022, which involved $200 million in co-financing from the OPEC Fund for International Development.

The current programme aligns with the bank’s Country Strategy Paper for Botswana (2022–2026), which prioritises building economic resilience through improved governance and private sector development.

Botswana’s public debt has risen sharply in recent years, driven by the COVID-19 pandemic, volatile diamond revenues, and increased infrastructure spending. The government has relied heavily on both domestic and international sources to finance its budgets, with total debt now nearing the statutory limit of 40 percent of GDP.

The P4.1 billion AfDB loan follows several other recent loans from multilateral lenders and bond issuances, reflecting a trend some critics have described as a borrowing binge. Just recently, the Botswana Public Officers Pension Fund agreed to extend a P3 billion loan to the government.