Botswana’s financial system remains fundamentally strong and resilient, even as macroeconomic pressures intensify. This is the key finding from the Financial Stability Council’s latest Financial Stability Report, which points to robust liquidity, solid capital positions, and a stable credit environment across banks and non-bank financial institutions (NBFIs).
The Financial Stability Council (FSC) is a statutory, multi-agency body tasked with safeguarding the soundness of the financial system.
Chaired by the Governor of the Bank of Botswana, the FSC brings together senior officials from the Ministry of Finance, the Non-Bank Financial Institutions Regulatory Authority (NBFIRA), the Financial Intelligence Agency (FIA), and the Deposit Insurance Scheme Botswana (DISB).
The Botswana Stock Exchange CEO also participates as an observer. Together, they assess systemic risks, coordinate regulatory action, and ensure that emerging vulnerabilities are addressed swiftly and collaboratively.
According to the report, Botswana’s banks remain well-capitalised and profitable. Non-performing loans are modest, and liquidity positions, while tighter than before, are still comfortably above the regulatory floor. Credit extension continues to support economic activity, and the credit-to-GDP gap remains negative, indicating limited risk of excessive borrowing.
The country’s financial market infrastructure is also robust. Trading activity on the Botswana Stock Exchange is recovering, and domestic capital markets continue to function smoothly, providing essential funding to both public and private sectors. Stress testing and risk assessments confirm that the sector can absorb moderate shocks without systemic disruption.
Yet, this picture of stability is not without cracks. The macroeconomic backdrop is weakening. A slump in diamond sales—the cornerstone of Botswana’s export economy—has driven a 3% contraction in GDP in 2024 and pushed foreign exchange reserves to a historic low. Liquidity in the banking system has shrunk sharply, from P10.5 billion in March 2024 to just P764 million a year later.
In response, the Bank of Botswana has stepped in, reducing the primary reserve requirement to zero and extending repo contracts from overnight to 7 days. These interventions have helped maintain market functioning, but underscore growing structural challenges: limited fiscal buffers, rising public expenditure, and greater reliance on domestic borrowing.
Beyond immediate macroeconomic pressures, the FSC highlights deeper, structural vulnerabilities. The economy’s dependence on diamonds creates a single-point failure risk. Funding across the banking system remains concentrated and heavily reliant on wholesale deposits, increasing susceptibility to shocks.
The report also flags increasing interconnectedness between banks, NBFIs, and the government, raising the risk of contagion if shocks emerge in any part of the system. Meanwhile, threats from cybercrime and illegal financial schemes are growing, with over 99,000 cyber incidents recorded in 2024 and P25.8 million in suspicious illegal deposit-taking transactions flagged in just six months.
To mitigate these risks, regulators are prioritising upgrades to cybersecurity protocols, tightening oversight of virtual assets, and enhancing crisis resolution frameworks. The FSC is also working to harmonise corporate governance rules and strengthen anti-money laundering systems ahead of a 2027 regional evaluation.