Johannesburg - The African Development Bank (AfDB) said Thursday it had approved a loan of 1.5 billion dollars for Botswana, the biggest loan ever by the bank.

Diamond-rich Botswana, usually hailed as a model of sound governance and economic management, is reeling from the effect of falling demand for its gems triggered by the global recession.

The loan will go towards patching up the shortfall in the government's 2009/2010 budget, the Tunis-based bank said in a statement.

Botswana's budget deficit stands at 13.5 per cent of GDP, according to the AfDB.

"The case of Botswana illustrates the impact that the financial crisis is having on even the best-managed economies in Africa," Donald Kaberuka, the bank's president said.

The bank has predicted that growth in Botswana will slow to around 2.6 percent this year from 3.9 percent in 2008.

The vast southern African desert state of around 1.9 million people relies on diamonds for most of its income.

The slump in demand for the precious stones forced mining giant Debswana - a joint venture between the government of Botswana and De Beers - to suspend production between February and April this year.(dpa)