S&P downgrades Botswana as diamond weakness proves more durable than expected

S&P Global Ratings downgraded Botswana's long-term sovereign credit rating to BBB- from BBB in March 2026, and cut its short-term rating to A-3 from A-2, keeping the outlook negative as it warned that "structural weakness in the global diamond market" would weigh on the minerals-dependent economy for longer than the agency had previously expected.

The downgrade capped a punishing run for a country whose diamonds have historically accounted for around 70% of exports and a third of government revenue. Production had fallen 27% in 2024 to 17.9 million carats, then a further 16% in 2025 to 15.1 million carats — a level roughly 40% below 2023 output — with 2026 expected to hold roughly flat at around 15 million carats rather than recover.

Lab-grown diamonds reshape demand

S&P pointed to the scale of the structural shift in demand: lab-grown diamonds had captured about 20% of the global market by value and as much as 50% of the volume of US engagement rings, a level of penetration the agency judged unlikely to reverse quickly. Combined with persistently weak demand from Chinese consumers, that left little prospect of a rapid price recovery of the kind that had followed previous cyclical downturns in the diamond market.

Deficits stretch years into the future

The rating agency forecast sizable fiscal deficits through 2029, with the shortfall reaching 8.9% of GDP in the 2026/27 fiscal year. Economic growth was projected at just 2.5% for 2026, a modest improvement after outright contractions of 2.8% in 2024 and 0.4% in 2025, illustrating how thoroughly the diamond downturn had spread beyond the mining sector into the broader Botswana economy.

A test of the country's diversification push

The downgrade added urgency to Botswana's efforts, already under way, to redirect exploration spending toward critical minerals and to seek a bigger, more direct stake in De Beers itself as compensation for a shrinking royalty and dividend stream from Debswana. Whether those initiatives could offset the loss of diamond revenue quickly enough to avoid further downgrades would depend heavily on factors well outside Gaborone's control — chiefly, how quickly global demand for natural diamonds could recover from the lab-grown shock.

Sources

• Miningmx: S&P cuts Botswana rating on diamond market woes, 16 Mar 2026

Photo: The Three Dikgosi Monument in Gaborone, capital of Botswana, whose credit rating was cut on diamond market weakness. CivArmy, Wikimedia Commons, CC BY 4.0.