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MOODY’S AFFIRMS THE “A2” SOVEREIGN CREDIT RATING AND CHANGES THE OUTLOOK ON BOTSWANA’S RATING FROM STABLE TO NEGATIVE

patriot by patriot
November 21, 2020
in Business
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MOODY’S AFFIRMS THE “A2” SOVEREIGN CREDIT RATING AND CHANGES THE OUTLOOK ON BOTSWANA’S RATING FROM STABLE TO NEGATIVE
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Moody’s Investors Service (Moody’s), in the latest out-of-calendar review of the credit ratings, affirmed Botswana’s rating of ‘A2’ for long-term bonds denominated in both domestic and foreign currency, and changed the outlook from stable to negative.

According to Moody’s, this update to the recent March 2020 rating, on a date that deviates from the previously published sovereign release calendar, is prompted by the risks associated with coronavirus shocks, given Botswana’s strong dependency on the diamonds industry for growth, exports and budget revenues. The revision of the outlook from stable to negative reflects the increasing risks of lower growth, higher budget deficits and likely resultant increase in government borrowing.   In their assessment, Moody’s observed that these adverse effects of COVID-19 pandemic, combined with the current challenges the government faces on fiscal consolidation, could mean further deterioration of fiscal metrics to a level not consistent with the ‘A2’ sovereign credit rating.

The affirmation of the rating, at ‘A2’, is underpinned by the Government’s still strong, albeit deteriorating, fiscal and debt metrics, in particular the relatively low public debt level, high debt affordability and fiscal and external liquidity buffers that help in mitigating the impact of the coronavirus shock. Furthermore, the country’s track record of fiscal prudence, adherence to the rule of law, robust institutions and effective policy making, as well as the current level of the Pula Fund, continue to provide key fiscal

and external buffers. The affirmation of the rating is also supported by macroeconomic stability underpinned by sound monetary policy; contained liquidity and banking sector risks, as well as limited susceptibility to event risks given Botswana’s track record of political stability.

Moody’s has indicated that there is a potential to change the outlook to stable if the observed deterioration of the fiscal metrics, caused by the coronavirus shock, is likely to be stabilised by credible fiscal measures aimed at rebuilding fiscal buffers in the long term and reduce fiscal vulnerabilities posed by the rigid budget structure. The ratings could be revised downwards on account of challenges encountered in halting the fiscal deterioration associated with the pandemic, suggesting a durable deterioration of fiscal strength. Similarly, Moody’s cautioned that a material weakening of the fiscal metrics, as a result of either an increase in financial support to state-owned enterprises, larger gross borrowing requirements or a further deterioration of the external position, beyond current forecasts, will increase the likelihood of a downgrade.

Overall, Moody’s assessment is that the country’s economic fundamentals, economic strength, debt profile, institutions and governance strength, have not materially changed since the last rating; hence the affirmation of the ‘A2’ credit rating of Botswana.

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  • Makwinja caught in Minergy saga   June 30, 2022
    Her husband –Leonard, is a Board Member at Minergy Coal ‘She is conflicted, hence she is failing to resolve our disputes with the company’ – Farmers ‘It’s an attempt to score cheap political points’ –Makwinja Minergy Coal proposes a […]
  • CA Sales lists on the JSEJune 29, 2022
    african-markets.com The JSE, Africa’s largest stock exchange, has listed CA Sales Holdings Limited on its main board providing South African investors with exposure in the fast-moving consumer goods (FMCG) company with a footprint in several Southern African countries. CA […]
  • BBS launches insurance agencyJune 28, 2022
    BBS Limited is pleased to inform its current and potential customers as well as stakeholders that it has launched an insurance agency called BBS Insurance Agency Limited; whose purpose is to provide insurance agency services and bespoke insurance products […]
  • MANTSWE JOINS TURNSTAR BOARDJune 28, 2022
    Turnstar Holdings Ltd, is pleased to announce the appointment of Mr Solomon Seoketsi Mantswe, to the Board of Directors, with effect from 1st July 2022. He brings over 30 years’ experience in the public service. He was appointed Deputy […]
  • ONGOING UKRAINE-RUSSIA WAR REMAINS A MAJOR RISK IN ECONOMIC RECOVERY EFFORTS – Minister Serame June 28, 2022
    . as there is continued surge in food prices and other commodities I take this opportunity on behalf of the Government and the people of Botswana to warmly welcome you all to Gaborone and to this 47th Meeting of […]
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