Gaborone: The Standard & Poor’s Ratings Services (S&P) has revised downwards its outlook on Botswana to negative from stable, while affirming its ‘A-/A-2’ long- and short-term foreign and local currency sovereign credit ratings. The announcement came just days after S&P’s rival, Moody’s, reaffirmed Botswana’s credit rating of A2 for foreign and domestic bonds for 2016 while also upholding a stable outlook forecast for the diamond-rich country’s economy.

S&P noted that Debswana, a joint venture between Botswana and De Beers, cut production in the second half of 2015 which had a strong impact on the economy. “Debswana has avoided job shedding, despite the reduced production, to keep skilled workers in place,” S&P wrote. “This strategy should allow for quick resumption of full production of between 23 million and 26 million carats a year should prices firm. The strategy should also avoid broader spill-over effects on the economy and the financial sector that aggressive furloughing would entail.”

S&P now forecasts 3% growth in real terms in 2016, on the assumption that diamond prices gradually pick up. Botswana is heavily dependent on diamonds which account for around 65% of GDP and 75% of foreign currency earnings.