Diamond Slump: S&P Cuts Botswana Credit Rating

(IDEX Online) - Botswana's credit rating has been downgraded for the first time in at least five years by S&P (Standard & Poor).

The US-based credit rating agency cited collapsing diamond revenues, deteriorating public finances, and a rapid erosion of foreign exchange reserves.

It has downgraded Botswana from BBB+ with a negative outlook to BBB, also with a negative outlook.

Botswana has held steady with its BBB+ rating for at least five years, although its outlook was downgraded from stable to negative in March of this year.

As the world's biggest diamond producing nation (by value), it relies on diamonds for around a quarter of its GDP and 80 per cent of its exports. It has been badly hit by the global slump in demand for natural stones.

The BBB rating means it has adequate capacity to meet its financial commitments, but adverse economic conditions or changing circumstances are more likely to weaken this capacity compared to higher-rated categories.

S&P ratings run from AAA (extremely strong capacity to meet financial commitments) to D (default).

Botswana's heavy reliance on diamonds is now a liability. Government debt is expected to nearly double to 43 per cent of GDP.

Latest forecasts indicate Botswana's economy contracted in 2024 (by about 3 per cent) and is expected to have near-zero growth in 2025 due to diamond market slump

Unemployment among young people under 24 exceeds 40 per cent, heightening social tensions and protests. And the country is in the midst of a national health emergency, with President Duma Boko warning of dire shortages in essential medicines.