(Reuters) -Global credit ratings agency Moody’s downgraded Botswana’s rating to ‘Baa1’ from ‘A3’ on Friday, citing the government’s challenges in adjusting to a structural downturn in the diamond industry and increasing government debt.
“The economy remains heavily reliant on capital-intensive diamond mining; diversification efforts lag due to reform delays, while exposure to climate shocks persist,” Moody’s said in a statement”
Long viewed as an African economic success story, Botswana is in a slump due to a prolonged downturn in the global diamond market, its key export, with demand hurt by global economic uncertainty and the rising popularity of lab-grown stones.
The world’s leading producer of diamonds by value, whose diamond exports continue to drive foreign exchange, has seen sector weakness widen its current account deficit and push reserves to a historic low, according to Moody’s.
It expects Botswana’s economy to likely decline by an additional 6% in 2025 as it remains exposed to global demand shocks and technological disruption from lab-grown alternatives and changes in consumer preferences
Last month, peer agency S&P cut Botswana’s rating to ‘BBB’ as it expects weak global diamond demand and prices will keep the Southern African country’s external and fiscal flow positions weak.
The agency said the global diamond downturn is unlikely to reverse, while maintaining the country’s outlook at ‘negative’.
(Reporting by Anushka Chourasia and Sfundo Parakozov; Editing by Shailesh Kuber)
