Bank of Botswana relays S&P Global Ratings downgrade of Botswana sovereign ratings to BBB-/A-3 with negative outlook

The Bank of Botswana published a press release noting that S&P Global Ratings has downgraded Botswana’s long-term foreign and local currency sovereign ratings from BBB to BBB-, and its short-term foreign and domestic currency debt ratings from A-2 to A-3, while maintaining a negative outlook. The sovereign ratings remain investment grade. S&P linked the downgrade to expectations of prolonged subdued global demand for diamonds, with weaker demand and lower prices likely to reduce fiscal revenue and export earnings, sustain relatively large general government deficits and increase net government debt. While the ratings continue to be supported by a strong institutional framework, a relatively strong net external asset position and comparatively low albeit rising government debt, S&P highlighted Botswana’s narrow, diamond-dependent economy as a constraint and referenced government diversification efforts under National Development Plan 12 and the Botswana Economic Transformation Programme. S&P indicated the outlook could be revised to stable if economic growth, fiscal performance and external balances improved significantly, including through a sustained rebound in diamond markets and effective implementation of diversification policies, while continued weakness in diamond demand and ongoing fiscal pressures could lead to a further downgrade.