Botswana's Economic Outlook Now Negative, says S&P
March 25, 25
(IDEX Online) - Botswana's economic outlook has been downgraded from stable to negative by S&P Global Ratings (S&P) on account of low demand for diamonds.
It forecasts a steep rise in government debt unless there is a substantial increase in diamond prices or significant fiscal intervention.
Botswana's economy is heavily reliant on diamonds. They account for around 80 per cent of its export earnings and a third of total budget revenues.
De Beers and the Botswana government finally reached agreement last month on the long-term mining and rough sales deals, but sales by their joint venture, Debswana, were down by 52 per cent for the first three quarters of 2024, and there a few signs of a sustained recovery in demand.
Despite downgrading its economic prospects, S&P left Botswana's long-term foreign and domestic currency sovereign credit rating unchanged at BBB+ and its short-term rating at A-2.
"The negative outlook is on account of S&P's expectation that weak global demand for diamonds and depressed prices will continue to suppress Botswana's exports and fiscal position, therefore, delaying government's fiscal consolidation agenda and the rebuilding of buffers," said the Bank of Botswana in a statement.
It highlighted the fact that S&P said the newly-elected government's commitment to reducing unemployment, diversifying the economy and increasing social support, while maintaining fiscal prudence, also had a positive impact to the ratings.
Pic of rough diamonds courtesy De Beers.