GABORONE - Botswana will cut its 2025 economic growth forecast to near zero due to a prolonged slump in the global diamond market, a senior finance ministry official said on Monday. The country's budget deficit is also expected to widen as diamond revenues fall sharply.

Botswana is the world's top diamond producer by value, and its economy depends heavily on diamond exports, which typically account for about 30% of national revenue and 75% of foreign exchange earnings.

In February, Finance Minister Ndaba Gaolathe had projected 3.3% growth for 2025, banking on a rebound in the diamond industry. At the time, the government also forecasted a budget deficit of 7.56% of GDP for the 2025/26 financial year - lower than the previous year's estimated 9% deficit.

But those projections are no longer viable, Tshokologo Alex Kganetsano, permanent secretary in the Ministry of Finance, told a parliamentary audit committee on Monday.

"In view of what has happened since February, we are going to revise this growth forecast downwards," Kganetsano said.

"We do have a preliminary figure of close to zero percent, but that figure has to be interrogated internally before we can officially publicize it."

The International Monetary Fund (IMF) is more pessimistic - expecting Botswana's economy to contract by 0.4% in 2025.

Botswana's economy shrunk by 3% in 2024, primarily due to the same diamond sector woes. The government had hoped that mineral revenues would more than double in 2025, helping the nation avoid a second consecutive year of recession.

"The trend doesn't seem to show any improvement. Instead, it is a deterioration," Kganetsano added.

He also warned of mounting unpaid government invoices, saying the decline in revenue has triggered severe liquidity challenges, posing a threat to the financial sustainability of government operations.