Botswana’s finance minister has sought parliamentary permission to lift the government’s statutory debt ceiling to 60% of the gross domestic product (GDP) from 40%, Reuters wrote on March 25.

The southern African country’s public finances are getting increasingly constrained as the downturn in the global diamond market continues.

Ndaba Gaolathe told legislators on March 25 that the move will, if approved, give the government the fundraising flexibility it needs during periods of economic stress, such as the one it is experiencing now.

Botswana is the world's second-largest producer of natural rough diamonds.  The mineral historically accounted for 70% of its exports, approximately 30% of the government's fiscal receipts, and about 25% of its GDP.

However, since late 2023, the industry has been struggling due to a sharp decline in the global prices and volume demand of natural gems.  This is because of growing competition from artificial diamonds and alternative luxury spending, as well as lower demand from China.

On March 12, S&P Global lowered Botswana’s long-term foreign and local currency sovereign credit ratings to “BBB-” from “BBB” with a negative outlook, citing the adverse impact of declining diamond prices on the nation’s economy.

It also downgraded the southern African country’s short-term foreign and local currency sovereign credit ratings to “A-3” from “A-2,” with a negative outlook as well.

It expects Botswana’s economy to grow by 2.5% this year and an average of 3.2% over 2027-2029, following output contractions of 2.8% in 2024 and 0.4% in 2025.

Raising the debt ceiling, Reuters cited Gaolathe as explaining, “does not imply immediate borrowing up to that level but rather establishes prudent headroom.”