The International Monetary Fund has issued a pointed warning to Botswana’s government, advising against plans to significantly increase its ownership stake in diamond giant De Beers. The caution comes as the country faces a sharp economic contraction driven by a downturn in its dominant diamond sector, with the Fund framing the proposed investment as a risk to fiscal stability during a period of fundamental market change.
In its 2025 Article IV Consultation report, the IMF detailed a “marked deterioration” in Botswana’s macroeconomic outlook. The assessment highlights the central tension facing policymakers: whether to pursue greater control over the nation’s primary resource or to heed international advice urging fiscal caution and diversification.
The government of President Duma Boko has signaled its intent to acquire a larger share of De Beers, the world’s leading diamond producer by value. Botswana currently holds a 15 percent direct stake. The opportunity arises from a major corporate restructuring, as Anglo American, which holds 85 percent, moves to divest its entire diamond portfolio by 2026 following a failed takeover bid by BHP Group in 2024.
President Boko has framed the potential acquisition as a matter of long-term national strategy, arguing it would allow Botswana to capture more value from its own finite resources. However, the IMF staff report explicitly “cautioned the authorities against increasing their stake,” noting that the country’s “already high dependence on the diamond sector” makes further financial exposure a dangerous gamble given current vulnerabilities.
The Fund’s warning underscores multiple layers of risk. A severe diamond market contraction is at the core of Botswana’s economic challenges. Mining output fell by 24 percent in 2024, while diamond trading slumped by 34 percent. Debswana, the 50-50 joint venture between Botswana and De Beers, has implemented substantial production cuts. This has led to an economic contraction, with only a gradual recovery projected to begin in 2026, contingent on a highly uncertain rebound in demand.
Compounding the cyclical downturn are profound structural shifts. The IMF pointed to the rapid ascent of lab-grown diamonds as a significant long-term threat. Synthetic stones, chemically identical to mined ones, now exceed 20 percent of global diamond jewelry sales. With retail prices up to 90 percent cheaper, the technological disruption is reshaping consumer preferences and undermining the price floor for natural diamonds.
External trade pressures add another complication. The United States, the world’s largest polished diamond consumer, maintains tariffs on Botswana’s exports. After negotiations, a 15 percent duty on rough diamonds remains, while stones polished in third-party countries face an average 28 percent tariff. The IMF noted these levies have dampened demand and production. In response, Botswana has reportedly offered the U.S. priority access to its critical minerals in exchange for further relief, highlighting the diplomatic trade-offs required of a commodity-dependent economy.
Domestically, the IMF warned that Botswana’s window for securing its fiscal health is narrowing. It stated that any further delay in fiscal consolidation “could deepen vulnerabilities.” Under the Fund’s baseline scenario, public debt could approach 60 percent of Gross Domestic Product by 2030, a significant increase for a nation with a historical debt ceiling of 40 percent. Concurrently, international reserves, a critical buffer, risk gradual depletion.
The human impact of this fiscal strain is becoming visible. Unemployment is estimated at 28 percent, with youth joblessness nearing 40 percent. Payment delays for government contractors and reported shortages in public clinics underscore the growing pressure on state finances.
The IMF’s policy recommendations are clear: prioritize strengthening fiscal buffers, accelerate economic diversification and avoid additional exposure to the diamond industry. The advice reflects a traditional Fund stance favoring prudence and risk mitigation for commodity-driven economies.
However, critics of the IMF’s position suggest it follows a familiar pattern of prioritizing immediate fiscal metrics over the strategic industrial aspirations of developing nations. While the Fund focuses on debt accumulation, the Botswana government views the potential De Beers stake as a pivotal move to gain leverage and secure future value from its resource base as the industry restructures.
Furthermore, the IMF’s push for “rapid diversification” confronts the reality of a thirty-year effort with limited success. The diamond sector still contributes approximately 80 percent of export earnings and a third of government revenue. Transitioning to other sectors like tourism or finance requires substantial investment—the very capital the IMF advises the government to conserve for buffers.
The Fund’s advice to “streamline spending” and reduce a public wage bill that accounts for over 13 percent of GDP is also politically fraught. Austerity measures during an economic contraction risk exacerbating social distress.
The situation places Botswana at a critical juncture. The IMF’s analysis suggests that investing substantial capital to acquire a larger share of a company facing cyclical, trade-related and technological headwinds could strain public finances without guaranteed returns. It implies that doubling down on diamonds contradicts the urgent need for a more resilient economic base.
Yet for officials in Gaborone, the risk of inaction—of allowing De Beers to fall under the control of a private equity firm or foreign state-owned enterprise with potentially different priorities—may appear greater than the fiscal risks highlighted in the report. The nation’s decades-long partnership with De Beers has funded infrastructure, education, and healthcare, underpinning its notable development trajectory.
As Anglo American shortlists potential buyers for its majority stake, the Botswana government has not publicly altered its course. The coming months will test its resolve to pursue greater ownership against the backdrop of stringent international financial counsel and a rapidly evolving diamond landscape.
The IMF’s 2025 Consultation serves as a stark reminder that the window for decision-making is narrowing. Whether Botswana follows the Fund’s path of cautious consolidation or seeks to deepen its stake in a heritage industry, the era of reliable mineral-led growth faces unprecedented challenges. The projected recovery remains uncertain and with the relentless rise of synthetic alternatives, the natural diamond may never fully regain its former status as an unwavering engine of prosperity.