GABORONE: Botswana is facing renewed pressure on its diamond-driven economy after S&P Global Ratings lowered the country’s long-term sovereign rating to BBB- from BBB and its short-term rating to A-3 from A-2, while keeping a negative outlook. The cut leaves Botswana at the lowest investment-grade level and comes as weaker rough diamond sales continue to squeeze export earnings, state revenue and foreign exchange reserves in one of the world’s most diamond-dependent economies.
S&P said weak global demand for natural diamonds is likely to persist longer than previously expected. Diamonds account for about 70% of Botswana’s exports, roughly one-third of government revenue and about one-quarter of gross domestic product. The ratings agency forecast economic growth of 2.5% in 2026 after output contracted 2.8% in 2024 and 0.4% in 2025, underscoring how the downturn in the country’s dominant industry has spread beyond mining into the wider economy.
The strain is visible across the supply chain. Debswana, the country’s main diamond producer and a venture between the government and De Beers, cut output by 27% to 17.9 million carats in 2024, then to 15.1 million carats in 2025. De Beers has also reported a 16% annual drop in Botswana production last year, while official finance ministry data showed the national diamond stockpile rose to 12 million carats by the end of 2025, almost double the allowable inventory level of 6.5 million carats.
Diamond slump strains public finances
The slowdown has fed directly into the budget. Botswana’s 2026-27 budget projects a deficit of 26.35 billion pula, equivalent to 8.9% of GDP, as spending continues to outpace revenue. The finance ministry has said mineral revenues for 2025-26 are expected at 10.3 billion pula, far below the historical average of 25.3 billion pula. In the same budget, total public debt, including guarantees, was projected to rise to 38.77% of GDP by March 2026 and 44.66% by March 2027.
External buffers have also weakened sharply. The Bank of Botswana said foreign exchange reserves fell to an estimated 47.4 billion pula in December 2025, equal to six months of import cover, down from 84.9 billion pula, or 18.3 months, in 2015. S&P put reserves at $3.8 billion at the end of 2025, down from $7.5 billion in 2017. The central bank has said weaker diamond export receipts and still-elevated import requirements have become a key vulnerability for Botswana’s exchange rate framework and broader external position.
Diversification pressure intensifies
The government has maintained that the economy should return to growth in 2026, with the budget forecasting a 3.1% expansion after two years of decline. At the same time, officials have acknowledged that the prolonged diamond market downturn has increased pressure to broaden the production base. In its latest Article IV consultation, the International Monetary Fund said Botswana was at a critical juncture as weak demand for natural diamonds intensified the need to diversify sources of growth and rebuild fiscal space.
Companies tied to the sector are already adjusting their sales strategies. State-owned Okavango Diamond Company said in February it would increase the share of its Debswana allocation sold through contracts to about half by value, seeking steadier sales in a weak market. The downgrade, together with shrinking reserves, rising debt and weaker diamond receipts, leaves Botswana confronting a more difficult economic environment as it works to stabilise public finances and reduce reliance on a single commodity. – By Content Syndication Services.