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Botswana is holding nearly double its permitted diamond stockpile as weak global prices and growing competition from lab-grown stones reduce demand, the government has warned.
In its 2026/27 Budget Strategy Paper published on Tuesday, the Botswana Ministry of Finance said the country held about 12 million carats of diamonds at the end of December, far above the official ceiling of 6.5 million carats.
“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,” the ministry said.
Botswana, the world’s second-largest diamond producer after Russia, depends on diamonds for roughly a third of its gross domestic product and a major share of government revenue.
The downturn has been worsened by weaker demand in the United States and China, the world’s largest diamond markets, where retailers have reduced orders as consumers shift toward cheaper lab-grown stones.
The ministry also cited trade pressures, including a 15% US tariff and higher duties in other key markets such as India, warning that these could prolong weak prices and further squeeze profit margins.
Rough diamond prices are expected to average $99.3 per carat, down from $128.8 per carat in 2024.
The government said, “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 revenue is forecast at 10.3 billion pula ($770 million) in 2025/26, far below the long-term average of 25.3 billion pula.
The ministry said the shortfall was likely to “persist over the medium to long term”, with a risk that revenues may not fully recover.
The policy paper warned that the prolonged slump in the global diamond market “poses a significant threat” to Botswana’s economy.
The government expects the economy to contract by nearly one percent in 2025, following a three percent decline the previous year.
“Compounding this situation is the decline in foreign reserves and government savings, which are further constraining fiscal space and exchange rate policy options.”
