MAJOR FALL IN RESERVES

MBABANE – There is notable reduction in the country’s reserves.

Gross official reserves stood at E6.6 billion at the end of the past month, representing a decline of 29.8 per cent M-M . It was a fall of 28.5 per cent over the year. This is as per the Monthly Statistical Release from the Central Bank of Eswatini (CBE). The notable reduction in reserves was mainly attributed to foreign currency outflows to commercial banks during the month under review. At this level, the reserves were lower than the international benchmark of three months, as they were enough to cover two and a half months of imports at the end of the period under review. Valued in special drawing rights (SDR), the reserves amounted to SDR325.5 million at the end of March, reflecting a decline of 26.4 per cent over the month, and 26.0 per cent over the year. Traditional rules that have been used to guide reserve adequacy suggest that countries should hold reserves covering 100 per cent of short-term debt or the equivalent of three months worth of imports.

Stability

Reserves are said to be an integral part of the policy toolkit as they insure against shocks and complement monetary policy to achieve price and financial stability. Meanwhile, net claims on government with the banking sector increased from E1.5 billion in January to E2.5 billion at the end of February this year. Notably, claims on government rose by 6.8 per cent M-M to reach E7.4 billion at the end of February on account of an advance from the CBE. Government deposits on the other hand, fell by 9.4 per cent from the previous month to reach E5.0 billion at the end of February.

Broad money supply (M2) stood at E20.8 billion at the end of February, increasing by 5.2 per cent from January. However, over the year, it contracted by 1.2 per cent. The M-M  growth was supported by both quasi money supply and narrow money supply (M1). Quasi money supply amounted to E13.2 billion at the end of February, higher by 7.1 per cent relative to the previous month, but over the year declined by 1.1 per cent. The M-M rise was driven by both components, time and savings deposits, which rose by 8.1 per cent to settle at E11.3 billion and 1.1 per cent to E1.9 billion, respectively. M1 rose by 2.1 per cent M-M and decreased by 1.4 per cent year-on-year to settle at E7.5 billion at the end of February 2022, driven by both components, Emalangeni outside depository corporations and transferable (demand) deposits. As a result, Emalangeni outside depository corporations and transferable deposits, went up by 4.6 per cent to E791.1 million and 1.8 per cent to E6.8 billion, respectively.

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