Diamond Slump: S&P Downgrades Botswana, Again
March 17, 26
(IDEX Online) - Botswana's credit rating has been downgraded for the second time in six months by the ratings agency S&P Global, in response to ongoing weak global demand for diamonds.
The world's second biggest diamond producer had held steady with a BBB+ rating for at least five years, before it was downgraded to BBB last September. It has now been downgraded again, this time to BBB-.
BBB+ indicates " investment grade " with adequate capacity to meet financial commitments. BBB is still investment grade but with greater vulnerability to adverse economic conditions. BBB- is the lowest investment grade, signaling the highest default risk within safe territory.
"The outlook is negative," said S&P Global, announcing the move on 13 March. "At the same time, we lowered our short-term foreign and local currency sovereign credit ratings to A-3 from "A-2."
The downgrade to A-3 signals reduced liquidity buffers amid declining diamond revenue.
Botswana 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.
Debswana, the government's joint venture with De Beers, is forecasting 2026 production at 15.1m carats, down 40% on 2023.
"The downgrade reflects our view that global diamond demand will likely remain weak for longer, weighing on Botswana's already-strained economy and public finances," said S&P Global, explaining the move.
It expects 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.