BOTSWANA

RISK RATING
Moderate
Default High Risk Score 3.80
Normal Average 1.68
Weighted Average 1.65
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

Botswana will need to tap into domestic and international debt markets to fund its gaping budget deficit. Sovereign bond investors will look favourably upon the country’s low debt to GDP ratio, even though government revenues are in freefall and despite mounting concerns over graft and mismanagement in the administration. Fresh with a new political mandate, President Masisi will seek to reinvigorate the economy and boost economic diversification. The long-term difficulty will be to liberalise Botswana’s economy and integrate it into regional and global markets. Rising inequality, unemployment, and costs of living will raise the risk of protests in an otherwise calm country. Masisi will need to attempt to juggle popular employment and welfare demands with necessary market-related adjustments which has been complicated by the pandemic. Masisi will seek to raise new credit on debt markets to finance greater spending of healthcare projects and rural development, particularly focussed on his party’s strongholds in southern regions.

  • President Mokgweetsi Masisi won a resounding victory in the 2019 elections in an endorsement of pro-market reforms and liberalising policies. The long-time governing Botswana Democratic Party (BDP) was re-elected with 67 percent of the contested parliamentary seats, despite a formal split from the party by Masisi‚Äôs predecessor Ian Khama. The elections marked a shift in political influence from Khama‚Äôs central region to Masisi‚Äôs southern parts of the country. The ambitious economic agenda of Masisi may be undermined by a nascent shift into tribal politics in Botswana, pitting the Masisi-supporting South against the Central Region of the Khama dynasty and the opposition.
  • Organised crime levels are rising, including smuggling of diamonds that has created spin-off activities. Diamond smuggling has increased the presence of organised criminal gangs in Botswana. Permeable borders create multiple entry and exit points at the disposal of smugglers along the borders shared with South Africa, Namibia, Zambia, Angola, and Zimbabwe. Smuggling activities represent an opportunity for spin-off criminal activities to develop including money laundering, bribery, and armed robbery. Although Botswana is one of Africa‚Äôs safest states, petty crime in cities has shot up in recent years, triggering a local perception of alarmism and xenophobia.
  • Botswana‚Äôs economy was in trouble even before the onset of the pandemic. The country has posted budget deficits for the past three years. The government had planned to return to a balanced budget and surpluses in 2020. However, falling mineral revenues and an unplanned wage rise in 2019 for public servants frustrated such plans. Botswana‚Äôs economy shrank almost ten percent in 2020 due to the impact of the coronavirus on its diamond mining and tourism industries. Revenues from the mining sector fell by 33 percent in 2020, while tourism revenues dropped by 32 percent. In order to fil the gap, Botswana will need to draw from its foreign exchange reserves or increase borrowing from domestic capital markets through bond issuance, as well as foreign sources of credit. Low government debt to GDP at around 20 percent will facilitate issuing new loans and attracting investment for economic diversification.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
1.8
Expropriation, Nationalisation, Confiscation & Deprivation
1.2
Contract Frustration & Breach
1.8
Taxation
1.8
Bribery & Corruption
1.2
Regulatory Burden
1.4
Strikes, Riots & Civil Commotion
1.8
Security
1.0
Sovereign Default
1.0
Economic Volatiliy
3.8

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