JOHANNESBURG (Reuters) - Botswana's economy expanded by 6.2 percent in the fiscal year to June 2007, while average inflation slowed to 7.1 percent last year, although price pressures were building, Finance Minister Baledzi Gaolathe said on Monday.

He also said in a budget speech a 19 percent jump in diamond exports helped widen the surplus on the current account and boost foreign reserves by $2.3 billion to $10.2 billion at the end of November.

"The improved real growth in 2006/07 national accounts year is attributed to both the mining and non-mining sectors, which recorded significant growth rates," Gaolathe said in a written copy of the speech.

Mining sector growth accelerated to 5.2 percent from 3.8 percent and the non-mining sector to 6.8 percent from 3.9 percent.

The diamond-rich southern African country has had one of the best performing economies in the region, enjoying average growth of around 8 percent over the last two decades.

Botswana, which has the highest sovereign ratings in Africa, was targeting 5 percent expansion a year over the next three years.

Gaolathe also said the government would replace its five-year bond due in March 2008 with a mix of maturities across the yield curve.

"Government will also continue to support the development of the capital market with a regular bond issuance programme," he said.

"This will include the introduction of six-month treasury bills, and a regular programme of issue and re-issue of bonds to build up and maintain a presence across the yield curve from six months to 12 years."

The Bank of Botswana would soon publish details of the programme.

Gaolathe forecast a budget deficit of 0.4 percent of an estimated GDP of 83.245 billion pula for 2008/09, although this did not include salary increases for public servants.

Including the expected pay rise would have pushed the deficit through 3 percent of GDP, and would instead be financed from the government's cash surplus, he said.

Gaolathe added diamond group Debswana's -- a joint venture between De Beers and the government -- production was expected to be about 761,000 carats lower in 2007 from the 34.4 million carats produced in 2006.