Bank of Botswana outlook revised to negative from stable and BBB+/A-2 issuer credit ratings affirmed by S&P Global Ratings

S&P Global Ratings revised Botswana’s outlook to negative from stable while affirming its “BBB+” long-term and “A-2” short-term foreign and local currency sovereign ratings, citing weaker diamond-driven export and fiscal flows that could further erode external and public balance sheets. In line with its approach of equalising monetary authorities with the sovereign, S&P also revised the Bank of Botswana’s outlook to negative from stable and affirmed its “BBB+/A-2” issuer credit ratings. The negative outlook reflects subdued global diamond demand and prices, which S&P links to a sharper fiscal deterioration and reduced buffers. The agency estimates real GDP contracted by 3.3% in 2024, driven by a 23.4% decline in diamond trading and mining in the first three quarters of 2024, and it estimates a fiscal deficit of 9.0% of GDP in fiscal year 2024-2025 and a planned deficit of about 7.6% of GDP in fiscal 2025-2026. It forecasts net general government debt to rise to 19% of GDP by 2028 from 3% in 2024, alongside an estimated current account deficit of 5.0% of GDP in 2024 and foreign exchange reserves (including the Pula Fund) of USD 3.8 billion at end-2024. S&P indicated it could lower the ratings if fiscal and external performance is materially weaker than forecast, including if diamond demand and GDP growth do not recover and buffers weaken further. The outlook could return to stable if diamond demand and prices rebound and materially improve fiscal and external flows, with longer-term upside also linked to diversification of the export and tax base.