Moody's Follows S&P, Downgrades Botswana
October 29, 25
(IDEX Online) - Global credit ratings agency Moody's has followed S&P in downgrading Botswana.
It says the economy remains over-reliant on diamonds and has not diversified enough to compensate for the drop in global demand.
Moody's has downgraded Botswana from A3 (upper medium grade credit quality, low level credit risk) to Baa1 (medium grade credit quality, moderate level credit risk).
It says it expects Botswana's economy to shrink by 6 per cent during 2025, largely due to consumers switching from natural to lab grown diamonds.
The Bank of Botswana said in a statement: "The negative outlook reflects the risk of a sharper credit deterioration than we currently expect, amid continued
weakness in the diamond sector and its difficult replacement as an engine of economic activity and foreign exchange earnings.
"The downturn in the diamond industry which started in 2023 has continued throughout 2025, exposing weak effectiveness of previous policies in support of economic diversification.
"Botswana's economy contracted by 3% in 2024 and will likely decline by an additional 6% in 2025 as it remains exposed to global demand shocks and technological disruption from lab-grown alternatives and changes in consumer preferences, pressures which we assess to be structural.
Moody's announced the change on 17 October, just five weeks after S&P (Standard & Poor's) downgraded Botswana - for the first time in five years - from BBB+ with a negative outlook to BBB, also with a negative outlook.
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.
Botswana, which was until recently the world's largest diamond producer by value (overtaken in 2024 by Angola), relies on diamonds for around 90 per cent of its exports and around a 30 per cent of its GDP (according to the Bank of Botswana).
Fitch, the last of the big three credit ratings agencies, has not changed Botswana's status.