HomeDiamonds & GemstonesLow gem prices may force Botswana to cut spending

Low gem prices may force Botswana to cut spending

The Orapa plant –
one of Debswana’s
operations that
has closed down
Dar es Salaam, Tanzania — MININGREVIEW.COM — 11 March 2009 – Botswana – the world’s biggest diamond producer – may find itself compelled to cut government spending by deferring selected projects in an effort to help the government reduce its budget deficit.

In an interview with Bloomberg News, Central Bank governor Linah Mohohlo – who has been attending an International Monetary Fund conference here – said that gem sales had “dried up,” curbing state revenue. She added that the government would also consider sourcing loans from domestic banks to help fund the deficit.

Botswana finance minister Baledzi Gaolathe said last month that sales of gems would probably drop by half this year.

“First and foremost, the government is reviewing the budget to see whether there are projects it can defer,” Mohohlo said. “Borrowing is the next step. Our banks are flush with money and that’s the easy way to raise funds.”

Debswana Diamond Company – the venture between the De Beers Group and the government of Botswana that produces a fifth of the world’s diamonds – has shut down all its mines until at least 14April 2009, after demand for the gems slowed. The company’s four mines account for 70% of Botswana’s exports.

Diamond mines in Botswana will probably stay shut until gem prices rebound and demand increases, according to Mohohlo. “We will leave them in the ground,” the governor said. “Production may resume when the recession is no longer with us and people want to buy them for the right price.”