Moody’s downgrades Botswana’s rating

Moody’s has downgraded Botswana’s sovereign credit rating for long- term bonds, denominated in both domestic and foreign currency, from‘ A2’ to ‘ A3’ citing that the downgrade is due to the reduction in the capacity of Government to absorb future shocks as a result of the erosion of fiscal buffers, occasioned by the COVID- 19 pandemic. Moody’s indicated that there are persistent fiscal consolidation challenges, which suggest a prolonged erosion of the country’s fiscal strength. The rating agency views the external position of Botswana as strong, albeit weakening due to the recent deterioration of the trade balance. Moody’s cautions that the long term economic challenges are likely to become more severe in the absence of effective progress towards attainment of economic diversification and improvement in the business environment both of which are key to promoting durable and balanced growth in the long term. The agency changed the outlook from negative to stable.