PUBLIC DEBT SLIGHTLY ABOVE THRESHOLD

MBABANE – The country still has a long way to go in its fiscal consolidation path following a ballooning public debt.

Preliminary figures released by the Central Bank of Eswatini (CBE) late on Monday, showed that total public debt stood at E25.8 billion at the end of the past month, translating to 36.3 per cent of gross domestic product (GDP). This shows an increase of 2.5 per cent from E25.1 billion recorded in January 2021. The figures are above the International Monetary Fund (IMF) stipulated threshold of at least 35 per cent of GDP. The public debt thresholds for low-income countries are calibrated by the IMF mainly to determine borrowing limits from the IMF and other concessional funds. In the IMF’s view, these limits are meant to prevent the build-up of unsustainable debt, while allowing for adequate external financing.

According to the CBE report, the increase in total public debt is due to an increase in domestic debt. Total public external debt stood at E10. 6 billion, an equivalent of 14.9 per cent of GDP. This shows that public external debt has remained constant in the period under review. “Outstanding public domestic debt was recorded at E15.2 billion, an equivalent of 21.4 per cent of GDP. Compared to E14.5 billion recorded in January 2021, public domestic debt increased by 4.4 per cent in the month under review,” highlighted the report.

The increase is due to an additional advance from CBE extended to government last month.  Government accessed an additional E500 million from the CBE advance window, bringing the total advance amount to E1 billion. The CBE, on behalf of government, has already issued multiple bonds of various tenors totalling to E150 million. This will be a reopening of the bonds issued in January 2021 and will be the last bond auction for the 2020/21 financial year.

Meanwhile, when presenting his Budget Speech recently, Minister of Finance Neal Rijkenberg had said, the global economic crisis caused by the coronavirus pandemic amplified the need to bring government’s fiscal accounts onto a sustainable path. Aligned to the Fiscal Adjustment Plan (FAP) approved in July 2020, the budget for financial year 2021/22 has been developed with a focus on fiscal consolidation.

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“In order to bring government operations to sustainable levels, the Fiscal Adjustment Plan lays out a set of fiscal policy measures aimed at an overall consolidation of 6.5 percent of GDP over a three-year period. “The consolidation process contains structural reforms to several expenditure items, among others the government’s wage bill. the wage bill is by far the largest single expenditure item and has been growing rapidly over the past years, threatening fiscal sustainability,” said the minister.

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