Stable outlook for Botswana economy as diamond market fully recovers

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

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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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