Botswana’s projected budget deficit for the 2025/26 financial year is already raising red flags with Econsult’s latest fourth-quarter Economic Review questioning whether official figures fully reflect the scale of the country’s fiscal pressures.
In the February 2025 budget, government projected a deficit of P22.1 billion, equivalent to 7.9% of GDP, for the 2025/26 financial year. However, subsequent figures presented in the Mid-Year Budget Statement (MYBS) and the Budget Strategy Paper (BSP) suggest a sharp improvement, a narrative Econsult says deserves closer scrutiny.
Looking at the first half of the current financial year, from April to September 2025, the MYBS and BSP point to an estimated deficit of P4.25 billion. This outcome is attributed to a package of austerity measures, including reduced spending on travel and overtime in the public service, the postponement of new development projects, and a slowdown in the issuance of government purchase orders (GPOs).
For the full financial year, the BSP projects that the deficit will narrow to P9.2 billion, implying a more “manageable” 3.1% of GDP. But Econsult cautions that this headline improvement may be misleading once financing data is taken into account.
“However, as with the reported preliminary estimate for 2024/25, the projected deficit for 2025/26 is questionable once one looks at the use of financing by the Government,” Econsult notes in the review.
While government has moved to trim certain expenditure lines, Econsult argues that the current approach falls short of what is required. “Rationalisation needs to go much further than recent measures that have involved trimming some relatively small expenditure categories,” the economists say, adding that delaying spending and building up arrears does not amount to a long-term solution.
The firm says data from the Ministry of Finance and the Bank of Botswana shows that between April and September 2025, government used a total of P15.3 billion in financing. This comprised P8.4 billion in additional borrowing and P6.9 billion drawn down from Bank of Botswana cash reserves. According to Econsult, this level of financing is “somewhat higher than the financing used in the first half of the previous financial year,” casting doubt on the scale of the reported deficit reduction.
The concerns are reinforced by the Budget Strategy Paper released in January 2026, which lays bare the risks facing Botswana’s fiscal position and long-term sustainability. Econsult says the BSP “acknowledges that the current fiscal path is unsustainable, given the new environment with structurally lower mineral revenues.”
“Keeping on the same path will inevitably lead to rapid debt accumulation, interest payments taking up an ever-increasing share of expenditure, and an eventual debt crisis,” the review warns.
While government has moved to trim certain expenditure lines, Econsult argues that the current approach falls short of what is required. “Rationalisation needs to go much further than recent measures that have involved trimming some relatively small expenditure categories,” the economists say, adding that delaying spending and building up arrears does not amount to a long-term solution.
“Overall, it seems likely that the real fiscal position is worse than that put forward by the Ministry of Finance in both 2024/25 and 2025/26,” the review concludes, underscoring the urgency of credible and sustainable fiscal reform.
Instead, Econsult calls for deeper structural reforms, including reducing the government wage and salary bill, better targeting of social spending, and refocusing the development budget on high-impact projects that can genuinely lift growth prospects. The BSP, the review adds, makes it “clear that government is at risk of running out of money – with results such as being unable to pay salaries – unless urgent measures are taken to rein in the deficit.”
Financing the deficit remains a major challenge. Domestic borrowing through bonds and treasury bills has fallen well short of targets, with only P3.1 billion raised out of an annual target of P10 billion by December, nine months into the financial year. Government is now expected to lean more heavily on banks and pension funds, a move Econsult says could severely squeeze the banking system and crowd out private sector lending.
“Overall, it seems likely that the real fiscal position is worse than that put forward by the Ministry of Finance in both 2024/25 and 2025/26,” the review concludes, underscoring the urgency of credible and sustainable fiscal reform.
