Botswana Sustains SP Credit Ratings

BOTSWANA's sovereign credit rating has remained constant since last year, according to the current report from Standard and Poor's (SP) Ratings Services. The credit rating experts indicate that Botswana has maintained the same standards for long term foreign currency debt, long and short-term local currency debt and short term foreign currency debt.

The country's stable outlook also remain unchanged. The current ratings are supported by factors such as balance sheet strength and expenditure flexibility. Public sector external assets, at 170 percent of current account receipts are among the highest of the rated sovereigns bolstering Government's capacity to absorb potential shocks.

Revenue from abundant diamond resources, coupled with fiscal prudence, has enabled the country to record healthy budget surpluses. In the coming years, the HIV epidemic will reduce general government surpluses from their long- term average of 6 percent of Gross Domestic Product.

Other factors that contributed to the positive rating include a strong and well managed mineral economy coupled with a long record of political and macroeconomic stability. Uncertain macroeconomic impact of the HIV/AIDS epidemic has however had an impact on the country's rating. More than one third of the 14-49 year old population estimated to be infected with HIV/AIDS. The figures are expected to increase sharply over the next five years, negatively affecting the country's GDP growth, domestic saving and public finance for years to come.

The rating of Botswana are constrained by the narrow economy which has the lowest per capita GDP among "A" rated sovereigns, at US dollar 3,300.

Meanwhile Botswana is rated as relatively well placed economically and fiscally to withstand the AIDS crisis. In particular, the capital intensive mining sector provides a robust base for the economy. Structural budget surpluses of 1-2 percent of GDP remain achievable, while development expenditure is the primary candidature for cuts to offset AIDS related spending pressure.

source - Mmegi Newspapars