GABORONE (Reuters) - Botswana's projected 2.6 percent budget deficit for the 2015/16 financial year could turn out to be much wider due to the downturn in the diamond market, credit rating agency, Moody’s said on Thursday. Diamonds account for almost 40 percent of Botswana's budgetary revenue and around 85 percent of exports in dollar terms. "We see risks for an even more pronounced deficit because of a prolonged downturn in world diamond demand specifically tied to China's economic rebalancing and lower luxury spending," Moody's said. A sustained weakness of the diamond market throughout the year has seen diamond prices softening while annual output targets have also been trimmed. [ID:nL5N0XK0Z4] Last week, Botswana's Finance Ministry forecast a deficit of 4.03 billion pula ($393 million), or 2.6 percent of its gross domestic product for the 2015/17 fiscal year. Moody's also said that the lower diamond revenues in 2015-16 will add to existing pressures on the government budget, including drought-relief expenditures and higher-than-budgeted outlays on public-sector wages. ($1 = 10.2669 pulas) (Writing by Tiisetso Motsoeneng; Editing by James Macharia)