Ratings agency S&P has revised its outlook on Botswana to ‘stable’ from ‘negative’, adding an economic rally, bolstered by a robust recovery within the diamond sector, will result in improved fiscal and external performance over the coming two years.

"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 ratings agency said.

"We expect Botswana's diamond export-dependent economy will rebound by 8.5% in real terms in 2021 because the diamond industry is rebounding from 2020's large pandemic-induced contraction," S&P added.

In August, Botswana raised its economic growth forecast for 2021 to 9.7%, compared to the forecast 8.8% in February, on the back of an increase in diamond sales and a recent rebasing of GDP accounts, Reuters reports.

In addition, the rally in demand for diamonds, particularly in the United States and China, also helped to drive a 41% rise in the sales of rough diamonds by Debswana Diamond Company - a joint venture between the government and Anglo American's De Beers - in the first half of this year.

Botswana is also making considerable progress in regard to the coronavirus vaccine rollout, the ratings agency went on to add, despite global supply restrictions earlier in the year, with the pace of the rollout comparing significantly well with other sub-Saharan African countries.

Moreover, S&P went on to affirm Botswana's ratings at 'BBB+/A-2', adding they continue to be supported by a stable and predictable institutional framework, and the monetary policy framework strengthens macroeconomic stability.

S&P downgraded Botswana’s outlook to negative last September, as a result of higher pressures on the country’s economic, external and fiscal performance over the next two years, in light of the pandemic and the effect on diamond exports.