The Ministry of Finance is poised to assume full control of all government procurement functions, marking a major shift in fiscal management as authorities move to contain rising spending pressures and restore macroeconomic stability.

The development is outlined in the International Monetary Fund’s (IMF) Botswana Staff Report for the 2025 Article IV Consultation, released this week following extensive engagement with Botswana authorities.

According to the IMF, the centralisation of procurement—previously managed by individual line ministries—forms a key pillar of government efforts to curb recurrent expenditure and improve value for money in public spending. The reform is expected to generate savings equivalent to 1.2 percentage points of GDP in the current financial year.

The Fund says the procurement overhaul is part of a broader package of fiscal reforms that also includes reduced transfers to state-owned enterprises (SOEs) and preparations for a World Bank-supported public expenditure review. The review will focus, among other areas, on identifying inefficiencies within the public sector wage bill.

While these complementary measures are not expected to have an immediate impact on the 2025 fiscal balance, the IMF notes that they are designed to deliver sustained cost savings over the medium to long term.

The reforms come against the backdrop of mounting economic strain. The IMF reports that mining output contracted in the first half of 2025, while activity in non-mining sectors remains weak, weighed down by government spending restraint and delayed payments to suppliers. As a result, Botswana’s GDP is projected to shrink by around 1 percent this year.

The reforms come against the backdrop of mounting economic strain. The IMF reports that mining output contracted in the first half of 2025, while activity in non-mining sectors remains weak, weighed down by government spending restraint and delayed payments to suppliers. As a result, Botswana’s GDP is projected to shrink by around 1 percent this year.

Inflationary pressures are also building, driven in part by exchange-rate depreciation, with inflation forecast to reach about 5 percent year-on-year by the end of 2025.

Botswana’s external position is similarly under pressure. Although portfolio inflows improved following the mandatory repatriation of pension fund assets, the financial account weakened due to declining foreign direct investment, lower external borrowing, and rising commercial bank deposits held offshore. The IMF notes that errors and omissions widened to 1.6 percent of GDP, potentially signalling unrecorded capital outflows amid growing policy uncertainty.

Looking ahead, the Fund warns that in the absence of decisive fiscal consolidation, public debt could rise sharply, approaching 60 percent of GDP by 2030. Under the baseline scenario, mineral revenues are expected to recover only partially, while international reserves are projected to decline gradually.

The IMF stresses that deep structural reforms remain essential. “Strengthened public procurement can help reduce costs and increase the efficiency of public investment,” the report says. It adds that improved cash and debt management, alongside the adoption of accrual-based budgeting, will be critical to ensuring timely government payments. Accelerated digitalisation and reforms in tax administration are also highlighted as key to boosting chronically weak non-mineral revenues.

Financial sector risks are also rising, with delayed government payments contributing to increasing loan repayment stress, including on mortgages. The IMF warns that the growing proportion of private-sector employees among borrowers heightens credit risks during economic downturns, while falling diamond prices are undermining the repayment capacity of mining firms. Increasing interconnectedness between banks and non-bank financial institutions—particularly through pension fund financing of government deficits—could further amplify spillover risks if conditions deteriorate.

 On fiscal management, the IMF urges authorities to address long-standing structural weaknesses, including a high public sector wage bill, a narrow revenue base, poorly targeted social protection programmes, and elevated transfers to SOEs.

The wage bill alone exceeds 13 percent of GDP and absorbs about 58 percent of total tax revenues,well above levels observed in comparable countries. The Fund recommends adopting a medium-term wage strategy aimed at gradually reducing the wage bill to around 11 percent of GDP through measures such as hiring restraint, tighter control of promotions and allowances, aligning wage growth with productivity, and modernising human resource management systems.