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Botswana's Credit Rating Slashed by Moody's
26 Sep
Summary
- Moody's downgraded Botswana's ratings due to expected fiscal deterioration.
- Weaker diamond revenue and customs receipts impacted Botswana's fiscal position.
- Outlook is stable, with potential for recovery based on fiscal policy response.
Ratings agency Moody's recently downgraded Botswana's domestic- and foreign-currency long-term issuer ratings. The sovereign's rating now stands at "Baa2" from "Baa1", reflecting concerns about an anticipated weakening of the nation's public finances. This marks the second such downgrade by Moody's within the past year.
The agency cited several factors contributing to Botswana's fiscal challenges. These include weaker revenue from the crucial diamond sector, disappointing proceeds from newly implemented tax measures, and lower-than-expected income from the Southern African Customs Union. These elements have collectively impacted Botswana's fiscal position.
However, Moody's adjusted the outlook to stable from negative. This decision was based on expectations of a more robust fiscal policy response and the potential for a sustained recovery in diamond revenues. Such factors could help slow the accumulation of debt.
Concerns remain regarding potential future investment in De Beers. Moody's warned of further downgrades if Botswana significantly increases its investment in the company through debt-financed transactions. This is particularly relevant as Anglo American aims to finalize a sale of its stake in De Beers within the current quarter.
