S&P Global Ratings has reaffirmed Botswana’s investment-grade sovereign credit rating at BBB- while also delivering a warning that the country’s continued dependence on diamonds is placing growing strain on public finances and external balances. It said this leaves the outlook negative despite signs of economic recovery.
In a research update released on September 11, S&P said structural weakness in global diamond demand continue to weigh on Botswana’s economy, export earnings and government revenues. While foreign exchange reserves have improved and the fiscal deficit narrowed more than expected in 2025, the agency believes the country remains vulnerable to prolonged weakness in the diamond market.
The agency maintained Botswana’s long-term sovereign rating at BBB- and short-term rating at A-3, while retaining a negative outlook. The outlook reflects concerns that subdued diamond demand will continue to constrain growth and erode fiscal and external buffers.
Botswana’s economy remains among the most diamond-dependent in the world. S&P estimates that diamonds have historically accounted for around 70 percent of exports, one-third of government revenues and a quarter of gross domestic product. Since late 2023, the sector has faced mounting pressure from weaker Chinese demand, changing consumer preferences and growing competition from lab-grown diamonds.
The ratings agency forecasts Botswana’s economy will grow by 3 percent in 2026 and average 3.4 percent between 2027 and 2029, supported by higher diamond production, copper exports and strong Southern African Customs Union receipts.
Although S&P believes the global diamond market may have reached its low point, it says the industry is undergoing a structural shift rather than a temporary downturn. Demand for higher-value stones remains relatively resilient, while smaller stones increasingly face competition from synthetic alternatives. The ratings agency forecasts Botswana’s economy will grow by 3 percent in 2026 and average 3.4 percent between 2027 and 2029, supported by higher diamond production, copper exports and strong Southern African Customs Union receipts.
Yet economic growth alone may not be enough to repair the government’s finances. S&P forecasts fiscal deficits of 8.9 percent of GDP this year and 6.7 percent next year, with net government debt rising to 34.2 percent of GDP by 2029 from a net asset position of 6.3 percent just six years earlier.
The agency noted that Botswana is accelerating diversification efforts through the Botswana Economic Transformation Programme, targeting sectors such as agribusiness, healthcare, renewable energy and technology. However, it cautioned that the programme’s impact on growth and revenue generation is likely to be modest in the near term.
The country retains its investment-grade status. But S&P’s message is that unless diversification begins to deliver meaningful results, the country’s fortunes will remain tied to a diamond market that is becoming increasingly unpredictable.
