DEBT RATIO 7TH LOWEST IN SADC

MBABANE – The country needs to exercise restraint when contracting any debt and further adopt more effective fiscal management principles and practices in the new year.

This is despite that the country’s debt to gross domestic product figure is among the lowest in the 16-member Southern Africa Development Community (SADC). Eswatini’s figures are the 10th  highest, but seventh lowest in the region. This is as per comparisons done by this publication based on 2020 data from the World Population Review. Total debt stock for the country stood at E26.0 billion at the end of November 2020, an equivalent of 41.3 per cent to GDP. This was an increase of 4.1 per cent when compared to E25.0 billion recorded in the previous month, due to an increase in public domestic debt. December debt figures were yet to be released by the Central Bank of Eswatini (CBE) at the time of compiling this report.

Celebrate

According to the data, Mozambique’s ratio of 124.46 per cent is the highest in SADC. Botswana has the lowest at 12.78 per cent. There is nothing to celebrate for Eswatini with regard to the debt figures as they are way above the International Monetary Fund (IMF) stipulated threshold of 35 per cent of GDP. In the Southern African Customs Union (SACU) region, the country’s debt ratio does not make for riveting reading. SACU is a customs union among five countries of Southern Africa, namely Botswana, Eswatini, Lesotho, Namibia and South Africa.  Eswatini debt figures in SACU are the third highest behind South Africa (57.81 per cent) and Namibia (51.60).  Lesotho and Botswana are at 37.95 and 12.78, respectively.
According to experts, the higher the debt-to-GDP ratio, the less likely a country will pay back its debt and the higher its risk of default.

Market

“A high debt ratio can make it difficult for a nation to access the capital market. When lenders fear they won’t be repaid, they charge high rates to compensate for the risk, or they may refuse to lend to a country entirely. “For countries that borrow in a foreign currency (or in a currency where they do not directly control the central bank), a high debt ratio indicates a greater risk of default,” shared an economist. When delivering his Budget Speech back in February last year, Minister of Finance Neal Rijkenberg had stressed on the need for government to manage public debt prudently in order to ensure that it was within the stipulated threshold of 35 per cent of GDP.  

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