Spending cuts save Botswana's investment status
Lewanika Timothy | Wednesday September 16, 2026 06:00
S&P Global Ratings last week affirmed the country’s long-term sovereign rating at BBB-, the lowest rung of investment grade, together with its A-3 short-term rating. However, the agency maintained a negative outlook, keeping Botswana on notice that another downgrade remains possible.
The decision comes six months after S&P cut Botswana from BBB to BBB-, following an earlier downgrade from BBB+ in September 2025. A further one-notch reduction would push the country into speculative grade, potentially raising government borrowing costs and weakening its appeal to investors restricted to investment-grade assets.
The latest assessment suggests fiscal restraint and a recovery in external buffers have bought government time, but have not removed the risks created by Botswana’s dependence on diamonds.
Preliminary estimates indicate that the general government deficit narrowed to 6.2 percent of gross domestic product in the 2025 fiscal year, significantly below the original projection of 9.5 percent.
However, part of the improvement came from a substantial reduction in development expenditure, suggesting that the stronger fiscal outturn was achieved partly by delaying projects rather than through a fundamental recovery in government revenues.
Latest estimates indicate that long-stricken government finances have warmed up thanks to improved diamond sales in the first half of the year and a P7.3 billion windfall from the Bank of Botswana.
Preliminary figures from the Bank of Botswana indicate that the final budget deficit for the 2025–2026 financial year came in at P16.3 billion, down from the forecast shortfall of P25.5 billion, largely due to a slowdown in spending.
Despite the reprieve, S&P warned that prolonged weakness in global diamond demand continues to weigh on exports, economic growth, and public revenues.
The ratings agency said Botswana could still be downgraded if fiscal consolidation falters and diamond demand weakens further, eroding the country’s fiscal and external positions.
Government is expected to continue running large budget deficits over the medium term, with net public debt projected to rise to 34.2% of GDP by 2029.
S&P forecasts economic growth of three percent in 2026, before averaging 3.4% between 2027 and 2029, following contractions in 2024 and 2025.
Botswana’s rating continues to be supported by comparatively low public debt, strong institutions and its historical record of prudent natural-resource management.
However, the negative outlook means government’s fiscal consolidation drive and Botswana Economic Transformation Programme will have to begin producing measurable results before the next ratings review.