(Ecofin Agency) - Botswana's economic growth is projected to slow to 1% in 2024, down from 2.7% in 2023, the International Monetary Fund (IMF) reports following a two-week mission to Gaborone.

In a statement released on July 12, the IMF attributed the decline to a reduction in diamond production, which will be partly offset by construction projects funded through fiscal expansion.

Botswana relies heavily on diamond revenues, which account for about 40% of public revenues, nearly a third of GDP, and 75% of foreign exchange earnings. However, the natural diamond market is currently facing a crisis due to declining demand and prices, as consumers increasingly turn to synthetic stones.

Inflation is expected to remain within the Bank of Botswana's target range of 3% to 6% in the medium term, supported by falling international oil and food prices, which keep inflationary pressures low.

On the fiscal front, the IMF forecasts a budget deficit widening to 6% of GDP in 2024, driven by falling mining revenues and increased capital expenditures. The IMF emphasizes the need for medium-term fiscal consolidation to achieve the authorities' goal of a budget surplus by 2026, thereby preserving fiscal sustainability.

To boost growth and job creation, the IMF recommends increased private sector participation, export diversification, and improved public sector efficiency. Policy priorities include reforming state-owned enterprises, enhancing trade-related infrastructure such as internet, energy, and logistics, and implementing trade facilitation measures.

In the medium term, Botswana's economic growth is expected to converge towards 4%, supported by a recovery in diamond mining, according to the IMF.