Moody's Downgrades Botswana Economy from Stable to Negative
April 14, 25
(IDEX Online) - Botswana's economic outlook has been downgraded from stable to negative by Moody's, as a result of the prolonged downturn in the diamond industry.
Last month S&P Global Ratings (S&P), another of the "Big Three" credit rating agencies, mad the same downgrade, forecasting a steep rise in government debt.
Botswana, the world's biggest rough diamond producer since Russia was hit by G7 sanctions, relies on diamonds for 80 per cent of its export revenue and 30 per cent of its GDP.
Moody's said Botswana's economy had contracted by between 3.1 per cent and 3.3 per cent in 2024, primarily due to a 52 per cent drop in diamond sales by Debswana - the joint venture between the government and De Beers - and a 33 per cent decline in diamond exports.
"The prolonged downturn in the diamond sector is exerting pressure on Botswana's economic growth prospects, exports and government revenues," said Moody's in its rationale for the negative outlook.
"Demand for polished diamonds remains subdued due to slowing global demand and changing consumer preferences, while structural shifts, including the growing popularity of lab-grown diamonds, are likely to continue to erode the industry's long-term profitability and its contribution to the economy and government finances."
It forecast a rapid increase in government debt and a weakening of debt affordability, and cautioned that previous government attempts to diversify the economy and revenue base had yielded mixed results.
Botswana finalized a diamond sales deal with De Beers in February, extending mining licenses for until 2054 and granting the government a larger share of diamonds.
However, De Beers has slashed production guidance by up to 40 per cent for 2025, reflecting continued market challenges.
Pic shows processing plant at Orapa mine, Botswana.