International credit rating agency, Moody Investors Service (Moody’s) has maintained Botswana’s credit worthiness for 2016, the same stable outlook it has held for the past several years.
According to a statement from the Bank of Botswana (BoB), Moody’s has reviewed and reaffirmed the country’s credit rating of A2 for foreign and domestic bonds during 2016.
Moody’s review took into account the commodity price shock and impact on the country’s economic and fiscal strength. Moody’s noted that the current economic and fiscal challenges, emanating from the external environment, are appropriately captured by the A2 rating. The rating as recognised by BoB is underpinned by Botswana’s continued fiscal resilience, which is supported by the current level of foreign exchange reserves, relatively low public debt and a track record of prudent rule-based fiscal policy, as well as a strong institutional framework. Moody’s, as highlighted by the Central Bank, also observe that, given the healthy financial position and the stable political environment, the risks that could put renewed pressure on the ratings are judged to be low.
BoB further explained that the credit rating is based on the assessment that weighs the Government’s relatively strong balance sheet, net external creditor position and low public debt, against potential challenges associated with the middle income status and a relatively small economy. The rating acts as an important measure that impact on the borrowing costs of a country.
Based on information obtained from Trading Economics, a world economics information site, regarding Botswana’s historical ratings, the country’s outlook, still under A2, was described to be negative in 2010 and 2011 respectively, which contrasts to the stable outlook it maintained in the years that followed. Furthermore, in 2007 prior to the economic meltdown in 2008/09 Botswana’s outlook was described to be positive.
“These factors would ensure restoration of buffers and sustained economic growth in the aftermath of the current challenges. At the same time, the rating remains constrained by the relatively slow pace of economic diversification and high dependence of the country on the diamond industry for growth, revenue and export proceeds,” stated BoB.