S&P slashes Botswana's rating status as diamond slump strains economy and fiscus

S&P Global Ratings has downgraded Botswana's sovereign credit rating, warning that prolonged weakness in the global diamond market is placing mounting pressure on the country's fiscal outlook, economic growth and external balances.

- SIPHELELE DLUDLA

The ratings agency on Friday lowered Botswana's long-term foreign and local currency sovereign credit ratings to 'BBB-' from 'BBB', while the short-term rating was reduced to 'A-3' from 'A-2'. The outlook on the rating remains negative, signalling the risk of further downgrades if fiscal and external conditions deteriorate further.

The decision reflects concerns that structural changes in global diamond demand will continue to weigh on Botswana's mineral-dependent economy for longer than previously anticipated.

Botswana is the world's second-largest producer of natural rough diamonds, with the sector historically accounting for around 70% of exports, about one-third of government revenue and roughly a quarter of GDP. The heavy reliance on the sector means any sustained downturn in diamond markets has an outsized impact on the broader economy.