S&P Global Ratings on Friday downgraded Botswana’s long-term foreign and local currency sovereign credit ratings to “BBB-” from “BBB,” citing structural weakness in the global diamond market that is expected to weigh on the country’s minerals-dependent economy for longer than previously anticipated.
The agency also lowered the country’s short-term foreign and local currency sovereign credit ratings to “A-3” from “A-2” and kept its negative outlook, Reuters reported.
The downgrade highlights growing pressure on Botswana, the world’s second-largest producer of natural rough diamonds, as the industry that historically accounted for about 70% of exports and roughly one-third of government revenue faces increasing challenges from synthetic diamonds and weak demand from China.
“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.
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Lab-grown diamonds now represent about 20% of the global market by value and up to 50% by volume in the U.S. engagement ring segment, while natural diamond sales continue to face headwinds from weak Chinese demand, U.S. tariffs, shifting consumer preferences toward gold jewellery and weaker luxury spending.
Debswana, the country’s main diamond mining company, reduced output at several mines in 2025 and temporarily shut others.
The downturn that began in the second half of 2023 resulted in a 27% production cut to 17.9 million carats in 2024, with output falling further to 15.1 million carats in 2025.
The company expects to maintain production at around 15 million carats in 2026, roughly 40% below 2023 levels, with only modest increases expected in 2027 and 2028.
S&P forecasts Botswana’s economy will grow 2.5% in 2026, after contracting 2.8% in 2024 and 0.4% in 2025. The country’s fiscal deficit is projected to reach 8.9% of GDP in the 2026/27 fiscal year, only slightly lower than 9.3% recorded the previous year.
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Image Credit: Freepik
