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Weakness in diamond market expected to have an impact on Botswana’s growth

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Botswana’s growth is expected to slow to about 3.5 percent in 2019 due to weaknesses in the diamond market, a severe drought and sluggish growth in neighbouring countries.

In a new report on Wednesday, 27 November 2019, IMF said Botswana’s growth is, however, expected to rise to 4.2 percent in 2020 as the diamond market normalizes and copper production comes into stream.

“Under staff’s baseline scenario, growth is expected to recover to 4.2 percent in 2020 as the diamond market normalizes and copper production comes into stream, and hover around four percent thereafter— a level too low to achieve Botswana’s development objectives and create enough jobs to absorb the new entrants into the labour market,” the Bretton Woods institution said.

It said fiscal consolidation should start in 2020, “supported by both expenditure and revenue measures beyond those considered by the authorities.”

“The consolidation needs to be carefully calibrated to minimize the impact on growth, competitiveness, and the most vulnerable,” the IMF said.

It noted that achieving Botswana’s objectives of moving to a knowledge-based economy and to high-income status by 2036 “will require changing the growth model from a mining and government-led model to private sector and export-driven.”

According to the Fund, Botswana’s fiscal deficit is expected to reach 5.75 percent of gross domestic product due to lower-than-expected revenue, an increase in public wages and other recurrent spending.

Despite these challenges, IMF said Botswana’s banking sector remained well capitalized and liquidity has improved. 

– APA 

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