S&P Global Ratings has cut Botswana’s long-term sovereign credit rating to ‘BBB’ from ‘BBB+’, warning that weak diamond demand, falling revenues, and rising debt are eroding the country’s financial stability. The outlook is negative.
Diamonds account for about 70% of exports and a third of government revenue, but global demand has slumped due to weaker Chinese and U.S. markets, competition from lab-grown stones, and shifting consumer preferences. Botswana’s economy contracted by 3% in 2024 and shrank again in early 2025.
S&P Global Ratings projects the economy to shrink by 0.4% in 2025, and then grow by 1.9%, 2.5% and 3% in 2026, 2027 and 2028, respectively.
The fiscal deficit widened to 8.9% of GDP in 2024 and is projected at 7.6% in 2025, while foreign reserves fell 27% to P45 billion in the past year. Public debt, once minimal, is expected to climb to 33.4% of GDP by 2028.
S&P cautioned that further downgrades are possible if diamond markets remain weak or fiscal reforms stall. However, a rebound in demand or progress on economic diversification could stabilize the outlook.
Botswana recently secured a new long-term mining deal with De Beers, raising its share of diamonds marketed through the state-owned Okavango Diamond Company to 50%. The government is also preparing to launch the 12th National Development Plan and the Botswana Economic Transformation Program to reduce reliance on diamonds.
Despite these initiatives, S&P said Botswana’s heavy dependence on diamonds leaves it vulnerable to external shocks, even as strong institutions and prudent management provide some support.