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Gaborone, April 9, 2025 — Moody’s Investors Service released a detailed credit opinion on April 9, 2025, following its earlier action to revise Botswana’s sovereign outlook to negative. The credit opinion reaffirms Botswana’s A3 long-term issuer rating while elaborating on the underlying vulnerabilities contributing to the change in outlook.
Highlights
- Botswana’s A3 credit rating affirmed, but outlook remains negative.
- Moody’s cites persistent fiscal risks, weak export diversification, and subdued investment levels.
- The opinion follows a formal rating action issued on April 4, 2025.
Structural Weaknesses Exposed
Moody’s report emphasized structural constraints within Botswana’s economic model. The country continues to depend heavily on diamond exports, which account for over 80% of foreign exchange earnings. The global downturn in diamond prices and competition from lab-grown diamonds are exerting pressure on government revenue and trade balances.
The opinion also highlighted growing fiscal imbalances, driven by subdued revenue growth, rising public wage costs, and delays in implementing expenditure reforms.
“The affirmation of the A3 rating reflects Botswana’s still-strong institutional framework and moderate debt levels, but the negative outlook indicates increased risks to these strengths,” Moody’s stated.
External Environment and Policy Response
Moody’s notes that external shocks—including a weakening Chinese economy and the escalating U.S.-China tariff war—further exacerbate Botswana’s vulnerability to export fluctuations. The report also calls for policy reforms to stimulate private investment, particularly in non-mineral sectors.
While the government has outlined intentions to improve economic diversification and strengthen fiscal controls, execution risks remain high.
Market Outlook
The credit opinion is likely to shape market expectations regarding Botswana’s fiscal policy and bond performance. Financial markets will closely monitor the upcoming mid-year budget review and fiscal consolidation plans from the Ministry of Finance for tangible reforms.
