Botswana’s successful use of natural resource wealth has made it a land of seeming paradoxes. It has a high level of government spending, yet a competitive business climate and a low tax burden. It is classified by the World Bank as an upper-middle income country, yet almost half of its population lives below the poverty line. These outwardly contradictory characteristics are in fact logical results of high levels of government involvement dependent on government-owned resources rather than taxes. Estimates of falling diamond revenues in the near future mean that the paradoxes of Botswana are unsustainable in the long run. The government must align its spending more closely with tax revenues in order to reduce resource dependency and make the transition to a mature and more diverse economy. Public sector reforms to date have focused on improving efficiency, not on reducing government size and scope. Privatization and economic diversification are recognized as important policy objectives, but very little has been accomplished in either area.