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WEAK LILANGENI: EXPORT EARNINGS RISE TO E2.6BN

21/04/2020 07:08:00 BY ASHMOND NZIMA

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MBABANE - The country recorded an improved merchandise trade surplus amounting to E528.5 million in the past month.

This represents a significant increase from the E121.1 million surplus recorded in the previous month. On a year-on-year basis, Eswatini’s trade surplus surged by 132.4 per cent from the E227.5 million recorded in March 2019. According to a report from the Central Bank of Eswatini on recent economic developments in the past two months, the trade surplus was primarily driven by a 27.7 per cent (month-on-month) rise in export earnings, from E2.110 billion to E2.695 billion.

Expansion

“Year-on-year export earnings rose by 25 per cent from the E2.157 billion recorded in March 2019. The depreciation of Lilangeni against the US dollar had a marginal effect on the increase in export income that accrued to the country in March 2020,”reads the report in part.

Last month, the Lilangeni/Rand continued to depreciate against the currencies of major trading partners. The already under pressure local currency weakened further in March, recording a double-digit loss of 11 per cent to trade at an average of E16.66 against the US Dollar.

An analysis of the country’s major exports indicates that on month-on-month comparison, earnings from soft drink concentrates surged by 60.9 per cent, from E853.5 million to E1.373 billion, and accounted for 50.9 per cent of total export earnings. Sugar exports increased by 15.5 per cent, from E564.2 million to E651.8 million and accounted for 24.2 per cent of total earnings.

Textile goods exported declined by 18.0 per cent from E287.4 million to E235.7 million, while accounting for 8.7 per cent of total earnings. Wood and wood article earnings fell by 7.3 per cent, from E125.4 million to E116.3 million and accounted for 4.3 per cent of total earnings. When the Lilangeni is weak, money earned from exports increases when converted to Emalangeni.

When it comes to the country’s major imports for March 2020 indicators, fuel and lubricants and electrical energy remained Eswatini’s leading import class, making up 16.8 per cent of the total import bill.

“The import bill increased by a smaller margin of 8.9 per cent (month-on-month), from E1.989 billion to E2.167 billion. The year-on-year import bill rose by 12.3 per cent from E1.929 billion recorded in March 2019.
“On a month-on-month basis, the bill for this class of goods increased by 17.2 per cent from E310.5 million to E364.0 million. ‘Vehicles and other transport means’ imported increased by 4.8 per cent, from E105.1 million to E110.1 million and accounted for 5.1 per cent of the total import bill. Machinery, appliances and electrical materials imported surged by 10.8 per cent from E227.8 million to E252.4 million, accounting for 11.6 per cent of the total bill,” reads the report.
Meanwhile, the country’s net foreign assets increased from E7.3 billion in January 2020 to settle at E7.5 billion in February 2020.

Liabilities

This was equivalent to an expansion of 2.2 per cent month-on-month and 5.2 per cent over the year. Growth was driven by net foreign assets of other depository corporations offsetting a fall in net official assets. Net foreign assets of other depository corporations rose by 30.3 per cent month-on-month to close at E2.1 billion at the end of February 2020.

This was mainly explained by an increase in investments of other depository corporations held abroad and in the Common Monetary Area (CMA).
The net foreign asset position of a country is said to be the value of the assets that country owns abroad, minus the value of the domestic assets owned by foreigners. The net foreign asset position of a country reflects the indebtedness of that country.

“Net official assets recorded E5.4 billion at the end of February 2020 reflecting a 5.5 per cent contraction over the review month.
Valued in special drawing rights (SDR), net foreign assets settled at SDR349.1 million at the end of February 2020, reflecting a decline of 2.0 per cent from the previous month and 4.2 per cent year-on-year,” reads the report in part.

Meanwhile, figures for government debt still do not make for reveting reading. Preliminary figures for external debt stood at E9.2 billion as at the end of last month, an equivalent of 12.6 per cent of GDP. This shows an increase of 17.9 per cent when compared to E7.8 billion recorded in December 2019.
“While a number of drawdowns were made on project loans, the increase can mainly be attributed to a substantial weakening of the Lilangeni against major currencies in which the country’s liabilities are denominated in the quarter under review.

“Outstanding domestic debt stood at E13.7 billion at the end of March 2020, an equivalent of 18.8 per cent of GDP. This shows an increase of 3.8 per cent when compared to E13.2 recorded the previous month. The increase is as a result of an additional advance of E460 million extended by the CBE to government; an improved uptake of Treasury Bills as well as a successful bond issuance in the month of March 2020,” reported CBE.

Meanwhile, during the same month of March 2020, the CBE on behalf of government issued a six-year infrastructure bond, as reported by this publication. An amount of E100 million was on offer while the bond attracted a coupon rate of 9.75%.

The bid-cover ratio was 132 per cent while the allotment ratio was 101.
“While commercial banks continued to dominate participation in government securities on the shorter end of the yield curve, non-bank financial institutions dominate on the longer term securities,” highlighted the report.

A local economist said the trade surplus was a drop in the ocean, as the debt stock figures were the major concern and were expected to worsen due to reduced economic activity caused by COVID-19.