• S&P Global Ratings downgraded Botswana’s sovereign rating from BBB to BBB- with a negative outlook on March 13, leaving the country one notch above speculative grade.

• The diamond sector—historically about 70% of exports and one-third of fiscal revenue—faces structural pressure from synthetic diamonds and weaker global demand.

• Botswana could see public debt rise to 37.4% of GDP by 2029, compared with a net creditor position of 6.3% of GDP in 2023, according to S&P projections.

Until recently, Botswana stood as an exception in Africa. The country maintained stable democratic institutions, prudent management of mining revenues, and an investment-grade rating admired across the continent. However, the latest rating action suggested that the country may have delayed—rather than avoided—the classic resource dependency trap.

S&P warned that Botswana’s fiscal and economic trajectory has become increasingly fragile and that policymakers now face narrowing room for maneuver.

A Growth Model Under Strain

S&P attributed the downgrade primarily to structural weakness in Botswana’s diamond sector.

Diamonds historically accounted for about 70% of exports, one-third of government revenue, and roughly a quarter of GDP. However, the global diamond market has entered a prolonged downturn.

Two structural forces have driven the decline. First, synthetic diamonds have gained market share and now represent about 20% of global market value and up to 50% of engagement ring sales in the United States. Second, weaker Chinese demand and a consumer shift toward gold jewelry have reduced demand for natural stones.

Debswana—a joint venture between the Botswana government and De Beers—has already cut production sharply.

The company reduced output by 27% in 2024 to 17.9 million carats and lowered production further to 15.1 million carats in 2025, representing a 40% decline compared with 2023 levels. The company does not expect a significant recovery before 2027 at the earliest.

As a result, Botswana entered an unprecedented double recession, with GDP shrinking 2.8% in 2024 and 0.4% in 2025. S&P expects only a modest rebound to 2.5% growth in 2026, well below the growth rates that previously characterized the economy.

Public Finances Under Pressure

Fiscal dynamics now represent the most pressing challenge.

Authorities estimate the fiscal deficit at 8.9% of GDP for the 2026/2027 fiscal year, following 9.3% in 2025/2026. The figures indicate only marginal fiscal consolidation.

S&P projects that net general government debt could reach 37.4% of GDP by 2029, compared with a net creditor position of 6.3% of GDP in 2023. The shift implies that Botswana could transform from a saving state into a borrowing state within six years.

Botswana’s Government Investment Account, which historically served as a fiscal buffer, has also shrunk dramatically. The fund declined from 5.4 billion pula ($396 million) in mid-2024 to 846 million pula by the end of 2025.

Meanwhile, domestic borrowing has intensified. Government domestic debt has reached its legal ceiling of 20% of GDP, and authorities are considering raising the limit.

Market pressure has also increased. Yields on three-month Treasury bills rose from 3.43% in early 2025 to more than 10.5% in March 2026, signaling tighter domestic financing conditions.

S&P expects interest payments to reach 11% of government revenue by 2029, double the level recorded in 2024.

Reverse Dutch Disease

Botswana illustrates what analysts describe as a reverse Dutch disease.

For decades, diamond revenues financed government spending, infrastructure development, and education. However, the sector discouraged broader economic diversification.

Mining accounts for only 2.3% of total employment, while the national unemployment rate stands at 21%, including 28.9% youth unemployment. When diamond revenues weaken, few sectors can compensate.

The government has recognized this structural vulnerability.

Following the October 2024 elections, the new administration launched the “Reset Agenda” and the National Development Plan 12 (NDP 12) to diversify the economy toward tourism, agro-industry, financial services, and knowledge industries.

Authorities aim to achieve high-income country status by 2036. However, the strategy carries a heavy fiscal cost.

The government estimates the program’s total cost at $27 billion over five years, of which $24.3 billion—about 90%—would come directly from the state budget.

A Government Under Pressure and an IMF Warning

The most sensitive issue now concerns the future ownership of De Beers.

Anglo American announced in May 2024 that it plans to sell its 85% stake in De Beers as part of a restructuring after a takeover attempt by BHP.

Botswana wants priority in the transaction.

President Duma Boko said in December 2025 that Botswana aims to “become the true owners” and control the entire diamond value chain. Mines Minister Bogolo Kenewendo warned that any sale “without our support will be difficult to carry out.”

However, Botswana faces competition. Angola has also expressed interest through state mining company Endiama.

Meanwhile, the International Monetary Fund has cautioned against expanding the state’s exposure to a sector facing structural decline.

Duma Boko

During its Article IV mission in September 2025, the IMF urged Botswana to implement a fundamental economic transformation. The institution linked long-term recovery to stronger private-sector participation, a diversified export base, and more efficient public administration.

The IMF recommended reducing the public wage bill, improving social spending targeting, strengthening governance of state-owned enterprises, and adopting a fiscal spending rule to contain long-term budget pressures.

Botswana’s authorities acknowledge the severity of the crisis but argue that the diamond slowdown remains largely cyclical. Officials say the non-mining sector remains resilient, which could support recovery once diamond demand stabilizes.

However, both S&P and the IMF disagree with that assessment. The institutions consider structural risks significant, especially because synthetic diamonds continue to gain market share and Chinese demand remains weak.

The IMF has already revised downward its medium-term outlook for the diamond sector and warned that U.S. tariffs could further weaken already fragile export prospects.

This article was initially published in French by Fiacre E. Kakpo

Adapted in English by Ange J.A de Berry Quenum