Saleshando warns Botswana is 'sleepwalking into a debt trap'’
The Leader of Opposition (LOO), Dumelang Saleshando, has accused the government of mistaking fiscal management for economic transformation by asking citizens to carry heavier tax burdens while unemployment remains stubbornly high.
Responding to the Vice President and Minister of Finance, Ndaba Gaolathe’s second budget, Saleshando warned that Botswana is “sleepwalking into a debt trap” as the government pushes ahead with higher borrowing, new taxes, and optimistic growth projections under the 2026/2027 Budget.
“This Budget admits we are in trouble,” LOO told Parliament. “But it does not demonstrate the urgency required to get us out of it.”
The criticism centred on the government’s plan to raise the statutory debt ceiling as public debt accelerates toward 40 percent of Gross Domestic Product (GDP), with projections indicating it could rise even higher next year.
Saleshando described the move as “normalising extraordinary borrowing” and warned that Botswana’s hard-earned reputation for fiscal discipline is now at stake.
“For decades, this country prided itself on prudence. Today, we are debating how high to raise the borrowing limit. That is not reform; that is retreat,” Saleshando said.
Delivering the 2026/27 budget speech in Parliament on Monday, Gaolathe stressed that Botswana is facing a challenging economic moment that requires bold but prudent fiscal policy choices.
He acknowledged that persistent deficits and falling revenues have weakened government investment accounts and strained the fiscal framework.
However, he argued the strategic direction remains focused on stabilising public finances while supporting growth, diversification, and social priorities such as healthcare and private sector development.
According to Gaolathe, Botswana’s economy is expected to grow by about 3.1 percent in 2026, following two years of contraction, an outcome driven by a recovery from weak performance in key sectors, especially diamonds.
He linked past contractions to a prolonged global downturn in the diamond market, driven by economic uncertainties and the rising popularity of lab-grown stones, which have undercut demand for natural diamonds.
GDP growth forecasts come after declines in successive years, demonstrating the fragility of Botswana’s revenues and the pressures on foreign exchange earnings.
Historically, diamonds account for about one-third of national revenue and roughly three-quarters of foreign exchange earnings, to show how deeply the economy has been tied to a single commodity.
Gaolathe announced that the government expenditure is regularly outstripping revenue, a structural imbalance that, if left unaddressed, would leave Botswana with little option but to cut spending sharply in ways that could undermine the nascent recovery.
For the 2026/27 fiscal year, the budget deficit is projected at 26.35 billion pula (around 8.9 percent of GDP), slightly higher than the previous year’s forecast.
This reflects “a structurally overstretched fiscal framework, in which expenditure commitments consistently exceed available and realistic realisable resources,” the minister said.
The government acknowledged that without policy adjustments, public debt is expected to breach the current statutory ceiling of 40 percent of GDP, reaching 38.77 percent by March 2026 and an estimated 44.66 percent by March 2027.
To accommodate essential expenditures and avoid destabilising austerity, Gaolathe proposed raising the legal debt limit.
“While such an increase may generate short-term credibility concerns,” he said, “these are outweighed by the significantly greater economic risks that would arise from the sharp fiscal consolidation needed to stay within the existing ceiling.”
Gaolathe argued that raising the debt ceiling, far from reckless, is part of a managed adjustment that avoids abrupt cuts to critical services and investment.
He noted that international institutions such as the International Monetary Fund (IMF) have been urging Botswana to reconsider borrowing limits as financing needs continue to outpace traditional revenue channels. In fact,
the IMF reportedly suggested raising the debt limit to 50 percent of GDP to allow greater flexibility.
The government has argued that lifting the ceiling would allow for a gradual fiscal adjustment rather than sharp austerity.
The Opposition countered that borrowing without visible economic acceleration only postpones inevitable pain. “You cannot borrow your way into productivity. You cannot borrow your way into diversification. At some point, the bill arrives.”
Saleshando also aimed for proposed tax increases, including higher corporate income tax, additional levies on top earners, and changes that will raise the effective VAT burden.
The timing, he argued, could not be worse. “We are taxing businesses in an economy that is barely growing. We are increasing pressure on households while telling them to be patient. Patience does not create jobs.”
He warned that higher taxes could discourage investment at a time when the government insists the private sector must lead economic transformation. “You cannot declare the private sector the engine of growth while simultaneously draining its fuel.”
Perhaps the most politically charged segment of the LOO’s response focused on youth unemployment. While the budget speaks of export-led growth, digital transformation, and long-term reforms, Saleshando said it fails to present immediate, scalable job creation measures.
“The graduate without work does not live in projections for 2027,” he said. “They live in today.”
The opposition accused the government of leaning too heavily on medium-term structural reform rhetoric without addressing the urgent labour market crisis confronting young Batswana. “This country cannot afford another
year where growth exists only in speeches.”
The LOO warned that rising debt comes at a time when foreign exchange reserves are under pressure and trade imbalances persist.
“With thinner buffers and rising obligations, we are entering uncertain global waters more exposed than we have been in years,” the Opposition said.
While welcoming the allocation for infrastructure maintenance, Saleshando questioned whether the system that allowed decay in schools, clinics, and roads can suddenly deliver efficient rehabilitation. “The issue has never been announcements,” he said. “It has been execution.”
Saleshando recommended reforms including digitising and reforming property and real estate levies to improve local service delivery, addressing tax evasion among high revenue stakeholders such as retail shops, informal motor vehicle vendors, landlords, and diplomatic passport holders, rationalising tax exemptions and incentives that disproportionately benefit high income individuals and large corporations, enforcing student loan repayment
systems more effectively, and introducing toll gates on high traffic transport corridors with revenues earmarked for road maintenance, rehabilitation, and the upkeep of animal barrier fences to reduce pressure on the national
budget, improve road safety, and preserve trade routes.
The opposition demanded strict procurement oversight and measurable timelines, warning that without accountability, maintenance funds risk being absorbed without visible impact.
The government has framed the 2026 Budget as the start of a ‘New Era of Economic Transformation and Fiscal Prudence’.
“Transformation is not a slogan. It is not a theme. It is not a press statement. It is a measurable shift in how the economy performs, and that shift is not yet visible,” Saleshando noted.
The LOO accused the government of presenting disciplined expenditure control as transformation, arguing that cutting inefficiencies, while necessary, is not equivalent to building new engines of growth.