AfDB Approves $304M Loan to Botswana for Fiscal Reform and Economic Resilience

The African Development Bank (AfDB) has approved a $304 million loan to support Botswana as it navigates deepening fiscal challenges and launches key governance and economic reforms. The loan will finance the Governance and Economic Resilience Support Programme (GERSP), a one-year general budget support operation tailored to address the 2025/2026 fiscal year.

A Lifeline Amid Mounting Fiscal Pressures

The AfDB’s Board of Directors gave the green light to the loan on Wednesday, citing Botswana’s urgent need for fiscal stabilization in light of dwindling revenues from diamond exports — the lifeblood of the country’s economy. Diamonds account for nearly 80% of Botswana’s total exports, and the country’s economic vulnerability was exposed when global demand for diamonds slumped in 2024.

As a result, Botswana’s economy contracted by 1.7% in 2024, with fiscal indicators rapidly deteriorating. The once-balanced budget of 2022/2023 has shifted into deficit territory, reaching 4.7% of GDP in 2023/2024. The deficit is expected to climb to 6.7% in the current fiscal year, underscoring the country’s need for external financial support and deep-seated reform.

Objectives of the Governance and Economic Resilience Support Programme

The GERSP seeks to cushion Botswana from immediate financial shocks while laying the foundation for longer-term economic transformation. It aims to bolster fiscal sustainability, transparency, and efficiency through robust governance reforms.

The program is built on two strategic pillars:

1. Strengthening Fiscal Sustainability and Transparency This pillar includes measures to:

   • Boost domestic revenue collection

   • Tackle illicit financial flows

   • Improve public financial management

   • Increase accountability in government spending

2. Stimulating Inclusive and Private Sector-Led Growth This component targets:

   • Improving the business climate for private investment

   • Supporting micro, small, and medium enterprises (MSMEs), with special focus on businesses run by women and youth

   • Promoting job creation and reducing income inequality

“The operation comes at a critical time for Botswana,” said Moono Mupotola, Deputy Director General for Southern Africa and Country Manager at the AfDB. “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.”

Partnership with Botswana’s New Government

The GERSP is designed as a transitional measure to manage short-term budgetary needs while engaging the newly elected government, which came into office in November 2024, on long-term development strategies. The Bank emphasized that it is committed to working hand-in-hand with Botswana’s leadership to achieve durable reforms and economic resilience.

“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,” added Abdoulaye Coulibaly, Director of Governance and Economic Reforms at the AfDB.

Building on Past Collaboration

This latest loan builds upon the success of the Economic Recovery Support Programme (2021–2022), also backed by the AfDB and co-financed with a $200 million contribution from the OPEC Fund for International Development. That earlier program focused on post-pandemic recovery, economic stability, and job creation.

The GERSP is also aligned with the African Development Bank’s Country Strategy Paper for Botswana (2022–2026), which underscores priorities such as:

• Enhancing economic governance

• Strengthening institutional capacity

• Promoting private sector development

• Building resilience against external shocks

A Strategic Step Toward Long-Term Resilience

Botswana’s economic challenges are largely tied to its overreliance on natural resources, particularly diamonds. By addressing structural fiscal issues and fostering diversification through targeted reforms, GERSP is expected to play a pivotal role in redefining the country’s economic path.

Through this loan and strategic engagement, the African Development Bank reinforces its role as a reliable development partner to Botswana, offering not just financial support but also critical expertise and policy backing at a time of economic transition.