P Global Ratings has changed Botswana’s economic outlook from stable to negative, citing external and fiscal pressures. The agency reaffirmed the country’s 'BBB+/A-2' long- and short-term sovereign credit ratings. 

S&P anticipates that unless the government makes significant fiscal adjustments or there is a notable rise in diamond prices and sales, Botswana's fiscal consolidation efforts will remain difficult. 

It forecasts that government debt, after accounting for liquid assets, will increase to 19% of GDP by 2028, up from 3% in 2024.

S&P Global Ratings also changed its outlook on the Bank of Botswana from stable to negative last week, while affirming its 'BBB+' long-term and 'A-2' short-term issuer credit ratings for the bank, Investing.com reports.

The ratings on the Bank of Botswana are aligned with those of the sovereign, as the monetary authorities are viewed as analytically inseparable from the government.

The negative outlook is driven by weak global demand for diamonds and low prices, which are expected to keep Botswana's export and fiscal flows subdued. It also reflects the potential further deterioration of Botswana’s external and public balance sheets. 

Furthermore, S&P Global Ratings may downgrade its ratings if Botswana’s fiscal and external performance significantly underperforms its forecast. 

This could happen if diamond demand and GDP growth fail to recover from their current lows, resulting in further deterioration of Botswana’s fiscal and external buffers. 

However, the outlook could be upgraded to stable if global demand and diamond prices improve, leading to a substantial boost in Botswana’s fiscal and external flows.

Botswana’s economy shrank by 3.3% in 2024, largely due to a sharp decline in diamond demand and prices. 

Despite the GDP contraction and a significant drop in diamond taxes and royalties, the new government for fiscal 2025-2026 introduced a budget in February 2025 that projects a sizable overall deficit of approximately 7.6% of GDP.