April 24, 2020 / 3:22 PM / a month ago

UPDATE 1-Botswana' GDP to shrink 13% as coronavirus dims diamond industry

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GABORONE, April 24 (Reuters) - Botswana’s economy will shrink by around 13 percent this year while its budget deficit balloons due to the impact of the coronavirus on its diamond industry, Finance Minister Thapelo Matsheka said on Friday.

Botswana, which has implemented a state of emergency and national lockdown to stem the spread of the COVID-19 disease, has tested 5,023 people, recorded 22 positive cases.

“Due to travel restrictions, we see the mining sector contracting by 33 percent in 2020 with diamond revenues falling to 6.7 billion pula from the original forecast of 20 billion pula,” Matsheka said.

Buyers from diamond cutting and polishing centres such as Mumbai, Antwerp and China, who visit the country as often 10 times annually to purchase the precious stones from market leader De Beers, have been unable to enter Botswana to do business due to restrictions on travel globally.

De Beers, which has mines in four countries, gets about 70% of its diamond supply from Botswana. The firm this week reduced its forecast for diamond production for 2020 by 7 million carats to between 25 million and 27 million carats.

Other industries have also felt the pain. The trade, hotels and restaurants sectors are set plunge 32.2% while manufacturing shrinks 6%.

Total revenues are set to fall from 62 billion pula ($5 billion) to 48 billion pula, pulling back expenditure from 67 billion to 59 billion pula, the finance minister said. That will lead to a budget deficit of about 5.9% compared to the 2.4% gap seen earlier in the year.

“We are still weighing options of how this shortfall will be financed. As of now, the central bank and the President have agreed to increase our local bond issuance scope from the current cap of 15 billion pula to 30 billion pula,” Matsheka said. ($1 = 12.42 pulas) (Reporting by Brian Benza, editing by Mfuneko Toyana; Editing by Alison Williams and Angus MacSwan)

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