S&P downgrades Botswana as diamond sector faces global headwinds
S&P Global Ratings on Friday cut Botswana's long-term foreign and local currency sovereign credit ratings to "BBB-" from "BBB," citing structural weakness in the global diamond market that will weigh on the country's minerals-dependent economy for longer than expected.
The ratings agency also lowered the country's short-term foreign and local currency sovereign credit ratings to "A-3" from "A-2" and maintained its negative outlook.
The downgrade reflects mounting pressure on Botswana, the world's second-largest producer of natural rough diamonds, as the sector that historically represented about 70% of exports and one-third of government revenue faces unprecedented challenges from synthetic diamonds and weak Chinese demand.
"Barring a significant policy adjustment or a strong recovery in global diamond demand, we project Botswana will post sizable fiscal deficits through 2029, putting further pressures on debt metrics," the agency said in a statement.
Lab-grown diamonds have captured 20% of the global market by value and up to 50% by volume in the US engagement ring segment, while natural diamond sales face headwinds from weak Chinese demand, US tariffs, shifting consumer preferences toward gold jewelry and weaker luxury spending.
Debswana, Botswana's main diamond mining company, cut production at some mines in 2025 and temporarily closed others. The downturn since the second half of 2023 led to a 27% cut in production to 17.9-million carats in 2024, falling further to 15.1-million carats in 2025.
The company expects to maintain production at 15-million carats in 2026, about 40% below its 2023 output, with only slight increases projected for 2027 and 2028.
S&P forecast Botswana's economy to grow only 2.5% in 2026 following contractions of 2.8% in 2024 and 0.4% in 2025. The fiscal deficit is expected to reach 8.9% of GDP in 2026/27, only slightly improved from 9.3% the previous year.
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