Diamond mining will anchor Botswana economy back to recovery & growth

On September 17, 2021, S&P Global Ratings (S&P) released an update of the
sovereign credit rating for Botswana.

The rating agency maintained the country’ssovereign credit rating for long and short term foreign and local currency sovereign credit at “BBB+/A-2”.

However, S&P revised the economic outlook from negative to stable on account of anticipated rebound in Botswana’s economic growth, partially ledby the diamond mining recovery.

According to S&P, the investment grade BBB+ and A-2 credit ratings are underpinned and supported by the country’s robust and predictable institutional and monetary policy
frameworks; modest net general government debt levels and relatively strong net external position; all of which support durable macroeconomic stability.

S&P expects economic recovery to be driven by the anticipated strong recovery in the diamond market which, in turn, should result in a substantial improvement in the domestic fiscal
and external sectors’ performance over the next two years.

The rating agency indicated that a change to the current rating, going forward, will depend on a variety of factors.

On the one hand, an upgrade could arise if Botswana manages to rebuild the fiscal and external buffers, along with sustainable diversification of the export base, with a view to cushioning the economy from future shocks.

On the other hand, a rating downgrade, if warranted, would reflect the delay in the recovery of  upstream and downstream diamond segments, because of the pandemic, as that translates into a weaker than expected fiscal or external performance.

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