S&P Global Ratings has affirmed Botswana’s long- and short-term sovereign credit ratings at BBB-/A-3, but kept the outlook negative, warning that continued weakness in global diamond demand could put further pressure on the country’s fiscal and external positions.
In its September 11, 2026 research update, S&P said Botswana’s minerals-dependent economy remains vulnerable to the prolonged downturn in the global diamond market. The agency said the weakness continues to weigh on economic growth, exports and government revenue, limiting the country’s fiscal and external buffers.
S&P also affirmed the Bank of Botswana’s long-term issuer credit rating at BBB- and its short-term rating at A-3, with a negative outlook.
Despite the concerns, the ratings agency highlighted improvements in Botswana’s external position. Foreign exchange reserves increased by almost $1.5 billion from their historical lows in June 2025, reaching around $4.8 billion by July 2026, supported by SACU receipts, a relative recovery in diamond sales and revenue, portfolio market gains and government foreign borrowing.
S&P said changes to the Bank of Botswana’s exchange-rate policy parameters had also helped encourage market trading and stabilise official reserves. Under the crawling peg framework, the Bank increased the annual rate of crawl to 2.76% from 1.51% in 2025 and widened the trading bands from about 0.5% to 7.5%.
The improvement in the external position comes as Botswana continues to face significant fiscal pressure.
S&P estimates that the general government deficit narrowed to 6.2% of GDP in fiscal 2025, better than the government’s original budget target of 9.5%. The improvement was attributed to higher-than-expected diamond revenue and a substantial reduction in development expenditure.
However, the agency forecasts the deficit will widen to 8.9% of GDP in 2026 and remain elevated at 6.7% in 2027, before narrowing to an average of 4.3% of GDP over 2028 and 2029.
The fiscal deterioration is expected to push Botswana’s net general government debt to 34.2% of GDP by 2029, compared with a net asset position equivalent to 6.3% of GDP in 2023. S&P also expects the government’s interest bill to rise to 10.7% of general government revenue by 2029, up from 4.7% in 2024.
Nevertheless, S&P expects the economy to return to growth after contracting by 2.8% in 2024 and 0.7% in 2025. It forecasts real GDP growth of 3.0% in 2026, followed by an average of 3.4% between 2027 and 2029.
The agency said the improved outlook partly reflects stronger-than-expected economic performance in the first quarter of 2026, when GDP expanded by 3.5% year-on-year, supported by diamond mining and trading, copper exports and strong SACU receipts.
The diamond industry remains central to the outlook. S&P noted that the sector has historically accounted for roughly 70% of Botswana’s exports, one-third of government fiscal receipts and one-quarter of GDP. The prolonged downturn has been driven by weaker demand, particularly from China, changing consumer preferences in the US and competition from lab-grown diamonds.
However, S&P believes the global diamond market may have reached a bottom and is moving towards a new equilibrium. It expects demand for high-value, larger stones to remain relatively robust while lower-value diamonds continue to face pressure from lab-grown alternatives.
This shift has prompted Debswana and De Beers to focus on mining efficiency, cost reduction and higher-value stones. S&P said the strategy appears to be gaining some traction, while production cuts and mine closures in other diamond-producing countries have reduced global supply.
Debswana has consequently increased its 2026 production target to 18 million carats from 15 million, with production expected to rise further to around 20 million carats annually between 2027 and 2029.
Beyond diamonds, S&P said Botswana’s diversification efforts could provide a longer-term boost. The Botswana Economic Transformation Programme is targeting sectors including agribusiness, healthcare, renewable energy and technology, alongside efforts to establish the country as a regional services hub.
S&P expects the programme’s initial impact on economic growth and fiscal revenue to be modest, with benefits potentially gaining momentum over the medium to long term.
The country’s institutional framework remains a key strength supporting its investment-grade rating. S&P highlighted Botswana’s relatively robust checks and balances and orderly transfer of political power, noting that the country remains among Africa’s stronger performers on governance and economic freedom measures.
The negative outlook nevertheless means the rating remains vulnerable. S&P said it could downgrade Botswana if fiscal and external performance becomes materially weaker than expected, including if fiscal consolidation falters while diamond demand deteriorates further.
Conversely, the outlook could be revised to stable if Botswana’s fiscal and external metrics improve beyond S&P’s expectations, potentially through sustained fiscal consolidation or a rebound in diamond markets. Longer-term upside could also come from successful diversification of the economy, exports and tax base.