Botswana�s credit rating upheld
Isaac Pinielo | Tuesday November 1, 2016 16:13
In a statement issued by the Bank of Botswana (BoB) last week, the US-based ratings agency reaffirmed the ratings of ‘A-’ for long-term bonds and ‘A-2’ for short term bonds in domestic and foreign currency denominated borrowing.
S&P observed that the ‘A-/A-2’ ratings have appropriately taken account of the enduring impact of the ongoing global commodity price shock, including challenges posed by the utilities sector and drought on the country’s fiscal position and economic activity.
“The retention of the negative outlook reflects the downside risks stemming from the possibility of a persistent commodity price shock, particularly in the diamond markets,” S&P says.
However, the agency believes that the country’s sound fiscal position strengthens its resilience to external shocks.
It says the economic outlook could be revised upwards from ‘negative’ to ‘stable’ should more favourable developments emerge in the domestic economy, including a significant improvement in the fiscal performance and a faster development of domestic capital markets.
The assessment also notes that prudent fiscal management, strong external balance sheet, robust institutional framework and long-track record of political stability continue to reinforce the ratings.
On the contrary, S&P says the sovereign credit ratings are threatened by a possible persistence of the shock in the diamond sector that could result in a much weaker economic growth and a significant deterioration in external position over the next 12–18 months.
Early this year, the ratings agency 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.
Moody’s credit rating for Botswana was last set at A2 with stable outlook. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Botswana thus having a big impact on the country’s borrowing costs.
Meanwhile, when presenting the draft 11th National Development Plan (NDP11) to Parliament last week, minister of Finance and Economic Development, Kenneth Matambo said the review of NDP10 shows that the domestic economy is still highly dependent on minerals and customs and excise revenues, while the overall economy remains relatively undiversified.
“This means that more needs to be done to foster economic growth and to expand revenue sources,” the minister said.