S&P Global Ratings downgraded Botswana’s credit rating late on Friday, although it kept the country within investment-grade status, pointing to concerns about fiscal stability linked to difficulties in the diamond sector. The agency also maintained a negative outlook.

Botswana’s long-term sovereign credit rating was reduced from BBB to BBB-, while its short-term issuer credit rating was lowered from A-2 to A-3.

“The negative outlook reflects our view that subdued global demand and prices for diamonds will continue to constrain Botswana’s economic growth prospects, and its export and fiscal receipts,” said S&P.

“It also reflects our view that the current volatile global backdrop will likely complicate Botswana’s fiscal consolidation efforts, leading to the further erosion of its external and public balance sheets,” it went on to add.

Botswana is the world’s leading producer of rough diamonds by value, but income from the industry, which accounts for about a third of government revenue, has been hit by declining prices as laboratory-grown diamonds increase competition, Bloomberg reports.

The downturn has prompted the government to propose raising its borrowing limit to 60% of gross domestic product from 40% to help fund a budget deficit expected to widen to nearly 9% of GDP in the 2026–27 fiscal year.

According to S&P, Botswana’s economy contracted by 3% in 2024 and likely shrank by a further 0.4% in 2025.

Furthermore, the ratings agency said a “modest recovery” is anticipated in 2026, with economic growth projected to reach 2.5%.