Botswana is facing growing fiscal pressures, with worries mounting that the cost of servicing government debt could spike this year. The culprits? A weakening Pula and rising interest rates.
Recent figures from the Bank of Botswana reveal some positive signs in the government’s finances during the first 11 months of the 2025/2026 financial year (April 2025 – March 2026). Government revenues hit P63.23 billion, up by P4.19 billion from the P59.02 billion recorded in the same period last year.
This boost largely came from stronger mining revenues, thanks to a rebound in diamond sales, alongside a solid uptick in non-mining income tax collections, helped by tighter tax enforcement. Looking ahead, total revenues and grants for the 2026/27 fiscal year are expected to grow by 8.4 percent to P77.2 billion, climbing from a revised P71.2 billion estimate for 2025/26.
The Southern African Customs Union (SACU) receipts, the government’s biggest revenue source, are forecast to rise to P26.8 billion in 2026/27, up from P24.9 billion the previous year. Non-mineral income tax is set to jump 21.1 percent, from P16.3 billion to P19.8 billion, driven by planned increases in personal income tax (2.5 percent) and corporate tax (3 percent). Meanwhile, mineral revenue is expected to inch up slightly – from P12.1 billion in 2025/26 to P12.2 billion in 2026/27 – held back by ongoing struggles in global diamond markets.
Despite these improvements and projected revenue gains, the strain on government finances is far from over. Pressure on spending and debt servicing costs is expected to grow this year. The May 2026 Financial Stability Report by the Financial Stability Council (FSC) warns that rising interest rates will make debt servicing more costly. “The cost of servicing the growing stock of debt could become increasingly burdensome in line with the rise in the monetary policy rate,” the Council stated.
Botswana’s public debt reached P90.03 billion in 2025, or 33.0 percent of GDP, and is expected to climb further as borrowing continues. The Council also pointed to risks from USD-denominated loans. When the Pula weakens, servicing these foreign currency debts becomes more expensive. “The decision to issue a sizeable USD denominated loan increases the sovereign’s exposure to exchange rate risk, as government revenues are increasingly earned in Pula, except in periods where diamond and other mineral revenues recover sufficiently to provide foreign currency buffer. Any depreciation of the currency would therefore, increase debt service costs and exacerbate fiscal pressures,” the Council explained.
Adding to the strain, Business Monitor International (BMI) highlighted that with inflation recently hitting double digits, Botswana’s policymakers may hike the monetary policy rate by another 50 basis points in the second half of 2026. “With inflation now materially exceeding target and risks tilted to the upside, we expect a further 50bps rate hike in H2 2026, taking the policy rate to 6.00% by year-end,” BMI said. The firm also warned that economic pressure on the Pula could accelerate its depreciation in the coming months.
Year-on-year to March 2026, the Pula lost 4.5 percent of its value against the South African Rand. It also slipped by 3.8 percent against the Euro and 3 percent against the Chinese Renminbi. On the flip side, the Pula gained 9.2 percent against the Japanese Yen and 1.8 percent against the US Dollar.
Botswana’s fiscal path looks bumpy ahead, with debt costs rising and currency pressures mounting; challenges the government will need to navigate carefully in the months to come.