S&P forecasts strong diamonds demand

Credit rating agency, S&P Global Ratings has forecast that demand for Botswana’s diamond will remain strong, spurring a stable economic outlook.

The announcement was made in line with the country’s rating for long and short term foreign and local currency sovereign credit, which the agency has maintained at BBB+/A-2.

“The stable outlook is on account of S&P’s expectation that the demand for Botswana’s diamond will remain strong against downsides risks presented by the weakening global economic activity,” said Bank of Botswana (BoB), Head of Communications and Information Services, Dr. Seamogano Mosanako.

Mosanako further said S&P has highlighted that Botswana’s current account and fiscal outcomes are to be supported by strong diamond revenues in the medium term.

“The rating agency also indicated that the gradual widening of the current account surpluses will strengthen foreign exchange reserves and support the exchange rate framework.”

According to S&P, the investment grade BBB+ and A-2 credit ratings are underpinned by the country’s robust institutional frameworks, compared with that of regional peers, which has supported the prudent management of the country’s natural wealth; strong monetary policy framework; proactive and independent central bank; strong mineral revenues that will support broadly balanced fiscal outcomes; all of which support durable macroeconomic stability. However, S&P has indicated that, on the one hand, a rating upgrade could occur if there is a significant increase in Botswana’s economic growth, along with the diversification of the export base that could lead to greater economic resilience.

On the other hand, the analyst said a rating downgrade, may arise in the event of a weaker fiscal or external sectors’ performance, combined with a short-lived recovery in the upstream and downstream diamond segments.