Ndaba’s Ship Starts to Turn

The Ministry of Finance's fiscal consolidation drive is beginning to show measurable results, with independent economic estimates pointing to a substantially smaller budget deficit after spending controls that the ministry says reduced government purchase commitments by P3 billion.

Economist Keith Jefferis in Econsult's Q2 Economic Review estimates the 2025/26 deficit at P13.9 billion, or 4.9 percent of gross domestic product, almost P11.6 billion below the P25.5 billion projected when Finance Minister Ndaba Gaolathe presented the 2026 Budget in February.

Jefferis described the latest financing data as "welcome evidence of fiscal consolidation," although he says the year-end P7.3 billion Bank of Botswana dividend accounted for a large part of the improvement.

His assessment coincides with Permanent Secretary in the Ministry of Finance Dr. Tshokologo Kganetsano, who recently gave Parliament's Public Accounts Committee a detailed account of expenditure controls introduced from August 2025, covering procurement, travel and overtime.

Government purchase orders fell from 231,369 worth P11 billion in 2024/25 to 136,292 worth P8 billion by February 2026, reducing commitments by P3 billion, or 27 percent, according to Kganetsano .

Travel expenditure fell 35 percent from P717 million to P466 million, while overtime costs declined 14 percent from P781.1 million to P675.4 million, delivering a combined reduction of P356.8 million.

While positive, the available data does not establish how much of the decline in commitments represents permanent savings rather than deferred expenditure.

With final government accounts published after lengthy delays, Jefferis estimated the fiscal balance using government borrowing and movements in balances at the central bank, which he says indicate a P13.9 billion deficit for 2025/26, against P25.5 billion in the revised budget.

He noted that the difference is partly explained by the BoB dividend, which came in as the central bank paid the government P7.3 billion for the year ended March, more than double the P3.2 billion paid a year earlier.

This payout, Jefferis says, helped lift the Government Investment Account from P600 million in February to about P9.2 billion in March.

Excluding the dividend, Jefferis estimates the deficit would have been P21.2 billion, still about P4.3 billion below the revised projection.

The improvement in the fiscal balance has, however, coincided with a sharp increase in government borrowing. An examination by t he Business Weekly & Review of the Bank of Botswana's June 2026 Botswana Economic and Financial Statistics shows government debt reached P89.86 billion by March, up more than P18 billion from P71.61 billion a year earlier.

From the data, domestic debt rose from P47.84 billion to P61.05 billion, while external debt increased from P23.77 billion to P28.81 billion. Including government guarantees, the wider debt stock stood at P92.73 billion.

Kganetsano's PAC presentation also showed the government using external loans and short-term central bank advances to manage liquidity during 2025/26, with the BoB advances subsequently repaid.

Conditions in the domestic debt market have since improved, with Jefferis saying almost all bond and Treasury-bill auctions since the beginning of 2026 have been fully subscribed without further increases in rates, while six-month T-bill yields fell from 11.2 percent in March to 9.7 percent in June.

However, the improvement in banking liquidity has not translated into stronger household credit.

A further review of BoB statistics by this publication shows outstanding commercial-bank lending to households fell from P57.08 billion in May 2025 to P55.02 billion a year later. Household lending has declined every month this year through May after standing at P57.19 billion in December.

Jefferis noted in Econsult's economic review that negative annual growth in household lending had not occurred previously in the past 30 years and argued that government borrowing to finance large deficits continued to crowd out private-sector borrowers.

While government debt has continued to rise, foreign exchange reserves have recovered from last year's decline.

BoB data show reserves reached $4.34 billion, or P61.8 billion, at the end of April, compared with $3.37 billion in March 2025. Reserves had stood at $4.75 billion at the end of 2023 before falling to $3.45 billion at the end of 2024.

Jefferis calculates that reserves increased 23 percent in dollar terms over the 12 months to April, reversing the long-term decline "at least temporarily."

In the absence of balance-of-payments data explaining the movements in foreign exchange reserves, Jefferis identified government external borrowing and commercial banks reducing foreign asset holdings in favor of Pula assets as likely contributors.

Jefferis however, described the reserve recovery as surprising against a worsening trade position. Exports fell 17 percent during the first five months of 2026 while imports rose 4 percent, more than doubling the trade deficit to P12.8 billion. Non-diamond exports provided a brighter spot, rising 16 percent on stronger copper and manufactured exports.

Economic output has also returned to positive territory after contractions in 2024 and 2025.

Real GDP expanded 0.2 percent year-on-year in the first quarter of 2026. Mining continued to contract as weaker diamond and coal production outweighed gains in copper and soda ash, while private non-mining activity grew 2.6 percent.

Jefferis forecasts growth of between 2.5 percent and 4.5 percent this year, largely depending on the anticipated increase in Debswana diamond production.

Beyond the fiscal adjustment, government is relying on the Botswana Economic Transformation Programme to mobilize private investment and broaden the economy's sources of growth.

The programme , whose delivery lead includes Naledi Madala, now operates through a dedicated secretariat in the Ministry of Finance, ministerial delivery units and weekly monitoring dashboards.

The PAC presentation by Kganetsano records progress on several projects. Land titles for all 82 serviced industrial plots at the Sir Seretse Khama International Airport Special Economic Zone have been transferred, with lease processes underway. Tutume abattoir began operating in April with 23 employees, while Amen Herbals moved into commercial production in March, creating 15 direct jobs.

Work is also continuing on industrial hemp research, the Kgale Cable Way and Xinii Resort projects, alongside financial-sector reforms.

Jefferis described BETP as an "admirable programme " and the central initiative for shifting the country's growth trajectory, but called for better reporting on its implementation and faster progress on digital identification, payments infrastructure and land access.

He also said reforms outside BETP, including privatisation and improvements in the governance and efficiency of state-owned enterprises, needed to accelerate.