Botswana is sitting on nearly double its permitted diamond stockpile as weak prices and rising competition from lab‑grown stones curb demand, the government said, warning the glut will weigh on economic growth.
The cash-strapped southern African country, the world's second largest diamond producer after Russia, relies on the gems for about a third of its GDP.Â
It held 12 million carats at the end of December, far above the 6.5 million government ceiling, the finance ministry said in its 2026/27 Budget Strategy Paper published Tuesday.
"This suggests that, over the short term, production is expected to remain broadly unchanged, until the level of inventories is drawn down closer to minimum allowable levels, creating room for additional production," it said.Â
The downturn has been compounded by softer buying in the United States and China, the world's biggest diamond markets, where retailers have cut orders amid a shift towards cheaper lab‑grown stones.
A 15-percent US tariff and higher duties for other key markets such as India risk prolonging weak prices and further squeezing margins, the ministry said, calling it a "source of concern".Â
Rough diamonds were expected to fetch $99.3 per carat, down from $128.8 in 2024, it said.Â
"If prices fall below this level in the remaining months of this financial year, this could reduce mineral revenues than what is currently projected."
Mineral revenues are forecast at 10.3 billion pula ($770 million) in 2025/26, well below the long‑term average of 25.3 billion pula.
"The shortfall is likely to persist over the medium to long term with a possibility of a non-recovery," the finance ministry said.
The policy paper warned that the prolonged slump in the global diamond market "poses a significant threat" to growth, with the economy projected to contract by almost one percent in 2025 after a three-percent decline the previous year.Â
"Compounding this situation is the decline in foreign reserves and Government savings, which are further constraining fiscal space and exchange rate policy options."
Botswana, a country that is 70-percent desert, was lifted out of poverty after diamonds were discovered in the 1960s.Â
It is now among several African governments and businesses seeking a stake in De Beers, the world's leading diamond company.Â
Mining giant Anglo American has said it will divest from De Beers as the long‑dominant producer faces a broader industry downturn.
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