2nd September 2025
Sello Motseta
Local institutional investors, pension funds, banks, asset managers, and international development finance institutions have been urged to explore the range of local bond instruments on offer, to further deepen the bond market.
These comments were made at a Road Show pre launch event for stakeholders to provide insights into the structure and performance of the government bond market and other instruments, the supportive policy environment, and investment opportunities that beckon.
Vice President Ndaba Gaolathe has stressed that it important to mobilise and operationalise carefully planned efforts to develop the Bond Issuance Programme and to create a platform for publishing a predictable auction calendar, to enhance liquidity, price discovery, and ensure greater stakeholder participation.
According to officials since 2019, the global economy has experienced a series of challenges including the Covid – 19 pandemic; geopolitical conflicts; extreme weather events, supply chain disruptions and recently the global trade reciprocal wars.
The domestic economy has also faced serious headwinds largely emanating from external environment, particularly the diamond sector.
“This sector has, in the recent past faced a prolonged downturn due to a confluence of factors such as subdued global demand for rough diamond, changing consumer preferences, declining prices, increased presence of lab grown diamonds and lower than-expected sales leading to huge inventories,” said Gaolathe.
He said, “Our economy has grown below its potential, recording average growth rate of about 2.6% in real times over the last decade. This lower than desired growth, has not generated enough sustainable jobs in the labour market as evidenced by high unemployment rates, particularly among the youth.”
According to officials, the downturn in the industry has also reduced the level of foreign exchange reserves, which as at June 2025 stood at P44.9billon or US$3.4 billion, representing about six (6) months of import cover of non-diamond goods and services. This low foreign exchange reserves compromises the stability of the current exchange rate framework.
The low levels mineral receipts has widened mismatch between revenue collection and expenditure, elevating Botswana’s financing needs. This has been worsened by various factors such as weak systems for prioritization and execution of development projects, archaic systems for procurement, and sub optimal performance of most of our State -Owned Enterprises (SoE’s) among others.
These factors combined have put pressure on public debt levels, which have been rising, reaching about 31 percent of GDP as July 2025. While this level is below our statutory limit of 40 percent of GDP, it remains unstainable looking at the trajectory of our public finances.
Preliminary data shows that spending levels in the 2024/25 financial year was lower when compared to the 2023/24 financial year, somewhat demonstrating our deliberate efforts towards expenditure restraint despite unavoidable obligations.
Furthermore, the first round of cost-containment measures, which include the centralisation of Government Purchase Orders have revealed a widespread systematic gross mismanagement of control measures across Ministries, Departments and Agencies.
Broadening the tax base is also a priority. For example, in August 2025, Government took a strategic decision to amend the Value Added Tax Act specifically to introduce taxation of 8 remote services and to mandate electronic invoicing.
These provisions are expected to enhance collection of value added tax. To complement this, in the November 2025 sitting of Parliament, other pieces of legislation including the comprehensive review of the Income Tax Act and the Value Added Tax Act as well as development of the new Tax Administration Act will be introduced.
“We have also started the process of transforming our SoEs into sustainable engines of wealth creation across all sectors, including the meat industry, rail and air, regulatory, banking and postal services,” said Gaolathe.
He said, “To mitigate the rapid decline of our foreign exchange reserves, as a responsible Government, we took bold and unpopular decisions during the mid-term review of the Exchange rate framework in July 2025. This included revising the current annual downward crawl from 1.51 percent to 2.76 percent, Widening the trading margins from Plus-minus 0.5 percent to Plus-Minus 7.5 percent, for the remainder of the year and maintaining the Pula basket of weights as 50 percent for the South African rand and 50 percent to the Special drawing Rights.”
A number of reform measures have also been introduced to support a sustainable fiscal path, with economic diversification also identified as a key priority.
The newly launched Botswana Economic Transformation Programme (BETP) is designed to address structural economic constraints, reduce over-reliance on diamonds, and foster a diversified, export-led economy that creates quality employment for Batswana.
“As part of this vision, I am pleased to announce that today we will showcase projects emerging from the BETP Labs. Many of these projects are investment-ready and require funding,” said Gaolathe.
He said, “It is important that our local investors take a front row in financing these opportunities, not only to capture their full value, but also to reduce concentration risk and avoid a situation Government, through its Development Finance Institutions, crowds out private capital.”
This is allegedly an opportunity to be the first 11 movers in Botswana’s economic transformation, where vision turns into investable reality.
The objective is to return the budget to a sustainable balance over the medium term, while creating the necessary fiscal space for investment in critical infrastructure and social development programmes. On the monetary side, the Bank of Botswana has remained focused on price stability, with inflation now aligning with the Bank’s objective range of 3 to 6 percent.
Officials conceded that there was a widening gap between the Bank’s policy rate and the effective interest rates prevailing in the market, particularly lending rates.
This divergence has been driven in part by overpriced deposits, which have pushed lending rates higher than what is consistent with our monetary policy stance.
In response, the Bank is implementing measures to improve alignment between market rates and the Monetary Policy Rate.
These measures include: • enhancing liquidity management operations to reduce excess volatility in short-term rates; • strengthening communication with market participants to anchor expectations around the policy stance; • working closely with commercial banks to ensure deposit pricing better reflects underlying funding conditions and the policy environment; and • deepening the interbank market to encourage more competitive price discovery.
The Bank of Botswana’s issuance programme includes Treasury Bills for short-term financing needs, alongside fixed-coupon bonds across a range of maturities — from 2 years to as long as 20 years — to suit a broad spectrum of investor preferences.
Auctions are conducted on a monthly basis, with an issuance calendar published in advance to give investors certainty and transparency.
The next phase of bond market development strategy will focus on expanding the investor base, including increased foreign investor participation, and exploring the introduction of new instruments — such as inflation-linked bonds — to meet the needs of different market segments.
Cornelius K Dekop Governor, Bank of Botswana, said “This event provides a valuable platform for direct engagement with you, the investment community, to share Botswana’s story, highlight recent macroeconomic developments and showcase the compelling value proposition of Botswana’s sovereign debt instruments.”
He said, “It is an opportunity to demonstrate, with evidence and with candour, the soundness of Botswana’s macroeconomic fundamentals, our consistent fiscal discipline, and the attractive prospects offered by our sovereign debt instruments.”
