Botswana’s finance minister, Ndaba Gaolathe sought parliament’s approval on Wednesday to raise Botswana’s legal debt limit from 40% to 60% of GDP, as the country faces fiscal strain from a sustained slump in the global diamond market.

He said the move is designed to give the government more room to manoeuvre during periods of economic stress like the one it is currently experiencing.

The slump in the diamond market has taken a heavy toll on the southern African nation, leading to back-to-back economic contractions in 2024 and 2025, Reuters news agency reports.

Botswana had previously been seen as an economic success, in part due to its low public debt.

The finance minister told lawmakers that increasing the debt ceiling “does not imply immediate borrowing up to that level but rather establishes prudent headroom.”

In last month’s budget, Gaolathe indicated that Botswana is forecast to exceed a 40% debt-to-GDP ratio in the fiscal year beginning in April.

Late last year, International Monetary Fund staff recommended raising the debt ceiling to 50% of GDP to provide fiscal room to respond to economic shocks.

Earlier this month, S&P Global downgraded Botswana’s sovereign ratings, citing prolonged weakness in the diamond market as a drag on the country’s economy.

Diamonds usually contribute around one-third of Botswana’s national revenue and 75% of its foreign-exchange earnings, leaving the country highly exposed to fluctuations in global markets.

This level of reliance surpasses the diversification guidelines recommended by international financial institutions.

Furthermore, analysis of supply chain resilience highlights Botswana’s heavy reliance on specialised processing facilities and export infrastructure.

Diamond sorting, cutting, and polishing operations demand substantial fixed investments, making it difficult to scale production in response to shifts in demand.

During prolonged market downturns, average capacity utilisation often falls to 40–50%, resulting in notable operational inefficiencies, similar to challenges encountered in innovation projects across the broader mining sector.