Botswana Faces Deficit as Diamond Sales Fall

Rough DiamondsGaborone: Botswana, which relies heavily on diamond revenue, will likely experience a budget deficit due to weak rough diamond sales recorded in the first half of the year, a government official has said.

Finance minister Kenneth Matambo announced a P1.23 billion ($120 million) budget surplus projection for the year.

However, Mmegi reports that this would likely be hampered by the depressed diamond market. “It is very difficult to quantify the potential impact. But as a first stab at it, I would say that the decline in government revenues would be proportionate to the decline in sales, i.e. if diamond sales decline 20 percent year-on-year then government mineral revenues would fall by the same amount,” the daily quoted economist Keith Jefferis as saying.

“But this could be a big simplification – compensating measures may be taken (such as cutting costs) that would reduce the impact on revenues, and furthermore we do not know what assumptions underpinned the budget projections.”

Botswana previously recorded deficits from 2009 to 2012 as a result of the 2008 global financial crisis.