Botswana has established a new sovereign wealth fund to stabilise its ailing economy, as falling diamond demand and strained state finances deepen fiscal pressures.
During a press briefing on Wednesday, officials said the initiative will revitalise struggling state-owned enterprises, while driving economic diversification and job creation, according to Reuters.
The launch comes as the world’s leading diamond producer by value faces one of its toughest downturns in years. Botswana’s economy contracted by 3% in 2024, with the International Monetary Fund projecting a further 0.4% decline in 2025 as weaker global demand for gems continues to weigh on growth.
Government data shows that diamonds account for roughly 80% of exports, and one-third of fiscal revenue, underscoring the country’s outsized reliance on the commodity.
Beyond rainy-day savings
Officials say the new vehicle will be more ambitious than the central bank-run Pula Fund, which has served as Botswana’s long-term stabilisation buffer since the 1990s.
“The Pula Fund is a liquidity stabilisation fund, it is a fund that takes cash and keeps it for a rainy day,” said Farouk Gumel, chair of the new fund’s board.
“This sovereign wealth fund will not be only about stabilisation, it’s about growth.”
While the Pula Fund was designed to preserve diamond wealth for future generations, years of budget deficits have forced the government to draw heavily from its assets.
According to local media citing Bank of Botswana data, the fund has shrunk from P24.3 billion ($1.8 billion) in 2018 to just P1.9 billion ($142 million) as of August 2024.
In contrast, the new fund will not only invest excess revenues but also manage state-owned enterprises, many of which have struggled financially and required repeated bailouts.
Its board, comprising both local and international experts, has been tasked with restructuring these companies to generate stronger returns.
Emma Peloetletse, permanent secretary to the president and deputy chair of the new fund, said only investment returns would be drawn, with capital preserved to build a sustainable income stream. The mandate allows investments both domestically and abroad.
Analysts note that the fund could help restore investor confidence if managed with greater discipline than its predecessor.
However, with Southern African Customs Union receipts under pressure and diamond revenues falling, Botswana’s fiscal outlook remains precarious.
NB: Local currency figures were converted to their estimated US dollar equivalents using P13.3/$1 as of September 12, 2025.
