Gaborone, Botswana — MININGREVIEW.COM — 18 November 2008 – Botswana’s economic growth slowed from 5.5% in the 2006/07 financial year to 3.3% in 2007/08, largely due to lower mining output.
Reuters reports that, in revealing this in a statement to parliament, finance minister Baledzi Gaolathe said that commodity prices had reduced demand for imports in industrialised countries, and that less direct investment would continue to weigh on growth.
Botswana’s economy has been one of the most stable in Africa, with growth – driven by diamond production – averaging around 8% per annum over the past two decades. Botswana is the world’s biggest producer of the precious stone.
Gaolathe pointed out that mining output had declined by 3.5% in the financial year to June 2008, and warned that a global financial crisis could hit demand for exports.
“The main risk to the Botswana economy from the financial crisis is the reduction in demand and prices of minerals,” he explained. “Diamond exports which, although strong in the first half of 2008, are highly vulnerable to a slump in global demand.”
Gaolathe said this could affect the balance of payments, which would have to be cushioned by foreign exchange reserves in the short term to help ensure government spending was sustained.
Botswana’s foreign reserves stood at about US$8.956 billion (R94 billion) at the end of October.