Botswana, the second-largest producer of diamonds in the world, has been experiencing a relatively stable economic outlook throughout 2023. However, like many of its counterparts in Africa, the country has not escaped from the inflationary effects on its economy.

Cryptocurrency is regulated in Botswana, with the passing of the Virtual Assets Bill in February 2022. The legislation has paved the way for proper regulation of the Web3 sector. However, out of Botswana’s 2.6 million population, only about 1%, or 26,770 people own crypto, according to Triple-A’s data.

Even though the overall economy is relatively stable, inequality in Botswana remains among the highest in the world, according to the World Bank. Job creation is slow, and unemployment is structurally high at 25.4%.

However, the Botswana Stock Exchange has been performing well in the post-pandemic period, recording high liquidity levels throughout last year. Last June, the central bank of Botswana considered introducing a Central Bank Digital Currency in the form of electronic coins.

Here are some notable economic and financial events in the past 5 months:

*(Shakawe, a village located in the northwest corner of Botswana / Photo by Unsplash)*

January – Budget Surplus

The financial outlook benefited from a growing demand for Botswana’s diamonds as buyers shunned Russia’s diamonds due to the ongoing conflict with Ukraine. Bloomberg wrote that the country saw a surplus of 0.55% of GDP. Russia is the largest producer of Diamonds.
The Bank of Botswana reported that inflation dropped from 12.4% in December 2022 to 9.3% in January 2023. The bank attributed the lower inflation rate to the downward adjustment in domestic fuel prices in December 2022 and January 2023.

February – Expected Positive Growth

Botswana expects a growth of 4% in 2023. It will target a medium-term growth of 5.7%, as the government plans to ramp up infrastructure investment, Reuters reported. The impending infrastructure investment will create a budget deficit of 3.06% of gross domestic product (GDP), compared with 2.1% for 2022/23, the report states.
The Corporate Council on Africa announces that the 15th edition of the US-Africa Business Summit will be held Botswana’s capital in Gaborone on July 11 – 14 this year, opening up the country for direct investments from the US.

March – Slow Down in Diamond Trade

Non-Bank Financial Institutions Regulatory Authority (NBFIRA) has moved to shut down unregistered cryptocurrency entities in line with the Virtual Asset Bill it passed in 2022. According to ITWeb Africa, the regulator directed unregistered crypto services provider FS Global Properties Limited Botswana to cease operations.
According to Business Insider, Botswana expects a slowdown in its diamond trade, which makes up about 90% of its exports. Botswana anticipates that the production of diamonds would fall by 1% in 2023, and growth in the diamond trade will decrease to 7%.

April – Uptake of Cryptocurrency Services

Fintech company Yellow Card sees positive uptake in cryptocurrency in Botswana. Botswana is one of Yellow Card’s best performers across the company’s footprint of 16 African countries, ITWeb Africa reported. The uptake mainly is supported by the need for digital payment options.
The annual inflation rate in Botswana eased to 7.9% in April 2023 from 9.9% in Mar 2023. Trade Economics states that it was the lowest reading since May 2021.
Botswana’s central bank kept its monetary policy rate unchanged at 2.65%, despite inflation rising in the latest month, Reuters stated. Inflation rose to 9.9% year on year in Mar 2023 from 9.1% in Feb 2023.

May – Strong Financial System Outlook

The Democratic Republic of Congo (DRC) and Botswana agree to explore new opportunities in some sectors including mining, agriculture and governance, The Daily News wrote. DRC has substantial untapped gold, cobalt, and high-grade copper reserves but lacks proper value add and export infrastructure. DRC opened its embassy in Gaborone, Botswana
The Financial Stability Council (FSC/Council) statutory establishment of the Bank of Botswana, said that the domestic financial system remains resilient and robust. This is despite high-interest rates and constrained supply of credit globally, elevated inflation, uncertain economic prospects and geopolitical risks.

-Edited by Faustine Ngila, Shigeru Sato