21 Aug 2026

Ongoing fiscal reforms, rebounding foreign reserves and stronger economic growth are expected to cushion Botswana against a potential credit rating downgrade by S&P Global on September 11.

Speaking at the ABSA Bank Botswana Business Banking Risk Management seminar in Gaborone on Wednesday, ABSA macroeconomic specialist, Mr Ridle Markus stated that structural adjustments over the past two to three years, focused on revenue mobilisation, expenditure containment, favourable agriculture conditions and solid commodity prices, have provided crucial economic buffers.

“Reserve levels across the board have actually risen quite sharply, and that allowed for additional interventions if we needed during this period,” Mr Markus said, noting there was a strong chance that the rating could be affirmed. 

He added that the non-mining sector grew 2.7 per cent in the first quarter, though momentum may slow over the next 18 months.

However, he said the country faced a material risk of another downgrade as its fiscal position remained precarious. 

He said the budget deficit was projected at nine per cent this year before falling to eight per cent next year and six per cent the year thereafter. 

On one hand, he warned that domestic borrowing had more than doubled over the past year, offshore borrowing would continue and the debt-to-GDP ratio could approach 50 per cent by next year.

“It also means then that, with conditions as it is, there is a risk of a rating downgrade,” Mr Markus said.

Again, he indicated that mining was expected to lead overall growth following a 107 per cent jump in second-quarter diamond output, pushing first-half production up nearly 43 per cent. Consequently, he added that second-quarter GDP could spike between 70 and 100 per cent before contracting in the third quarter due to base effects. 

However, he said lower global diamond prices meant that increased exports would not automatically boost government revenue.

“Despite the fact that diamond exports will increase, that revenues to government will not necessarily increase as well,” he said.

He said additional economic headwinds included high inflation, expected to stay above the three to six per cent target band until April next year despite dropping from 10.7 to 9.4 per cent in July, alongside a nine per cent electricity tariff increase and el niño risks to food security. Ultimately, he said Botswana’s outlook remained tied to diamond production, fiscal sustainability, inflation, foreign reserves and agriculture.

Meanwhile, the seminar aimed to equip local businesses with key economic insights, foreign exchange trends and risk management solutions to guide financial decisions. ENDS