S&P Global Ratings (S&P) has explained that the negative outlook posture it has taken on Botswana reflects the view that subdued global demand and prices for diamonds will continue to constrain the country’s economic growth prospects, its export and fiscal receipts.
The global ratings body recently released an update on Botswana’s sovereign credit rating, downgrading the country’s long-term foreign and local currency ratings from ‘BBB’ to ‘BBB-‘. Similarly, the short-term ratings for both foreign and domestic currency debt were lowered from ‘A-2’ to ‘A-3’, while the outlook remains negative. “It also reflects our view that the current volatile global backdrop will likely complicate Botswana’s fiscal consolidation efforts, leading to the further erosion of its external and public balance sheets,” S&P reasoned.
“We could lower our ratings if Botswana’s fiscal and external performance proved materially weaker than our forecast. This could happen, for instance, if diamond demand falls further and GDP growth falters or if fiscal consolidation stalls, leading to further weakening of Botswana’s fiscal and external position.” The country’s central bank, Bank of Botswana said the lower ratings reflect expectations of prolonged subdued global demand for diamonds, which continues to weigh down on Botswana’s already constrained economy and public finances.
The bank added that the downward revision in ratings reinforces the importance of maintaining robust institutions and sound policy frameworks that support macroeconomic stability and sustainable economic growth. “It also underscores the need for sustained implementation of economic structural reforms and the Government-led transformation efforts aimed at accelerating economic diversification and industrialisation; improving resource mobilisation (including tax coverage, administration and closing leakages); thus, rebuilding buffers and enhancing fiscal sustainability.
Progress in these areas would strengthen economic resilience and over time, could positively influence the Botswana’s credit ratings and outlook,” Bank of Botswana added. Botswana is the world’s second-largest producer of natural rough diamonds, with the diamond sector having historically represented about 70% of exports, approximately one-third of the government’s fiscal receipts, and about one-quarter of GDP. Since late 2023, the diamond sector has been under pressure, with global prices and volume demand having fallen sharply.
This reflects increased competition from artificial diamonds and alternative luxury spending, as well as lower demand from China. As a result, prices have fallen sharply since their peak in 2022 and remain subdued. Meanwhile, S&P said it expected Botswana to have only a modest economic recovery in 2026 of 2.5% and an average of 3.2% over 2027-2029 following output contractions of 2.8% in 2024 and 0.4% in 2025.
The agency highlighted that economic growth during the third quarter of 2025 is set to be negated by a large contraction in diamond production during the fourth quarter. “Real GDP was volatile, increasing by 8.2% year on year during third-quarter 2025, after a contraction of 5.2% year on year in the preceding quarter. The economy grew by 0.8% year on year for January-September 2025.” It added: “However, a 56% year on year decrease in diamond production during the final three months of the year led to a full-year GDP contraction in 2025.”