Global credit ratings agency Moody’s Investors Service has downgraded Botswana’s sovereign rating from A3 to Baa1, citing growing fiscal and external vulnerabilities following a prolonged slump in the diamond industry, as reported by Reuters.
In its assessment, Moody’s noted that Botswana’s economy remains heavily dependent on diamond mining, which accounts for about 70 to 75 percent of export revenues. “The economy remains heavily reliant on capital-intensive diamond mining, while diversification efforts lag behind due to reform delays and persistent exposure to climate shocks,” the agency said.
The downgrade comes as global demand for natural diamonds continues to weaken, driven by the rise of lab-grown alternatives and slowing luxury markets in the United States and China. Moody’s warned that Botswana’s current account deficit has widened significantly, while its foreign reserves have dropped to multi-year lows. The agency now projects that the country’s economy could contract by as much as six percent in 2025 if current conditions persist.
Financial analysts say the downgrade underscores the urgency for Botswana to diversify its economy beyond diamond exports. However, they added that the country’s historically strong institutions, prudent fiscal management, and stable governance still offer some resilience, provided the government accelerates reforms to boost non-diamond sectors.
