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WE IN MOVING TOWARDS A SUSTAINABLE PATH -ECONOMIST

01/09/2024 08:35:00 Nhlanganiso Mkhonta

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MBABANE – Economist Sanele Sibiya says the Central Bank of Eswatini (CBE) annual integrated report for 2023/24 shows that there was some much work done by the bank it showed the country was moving towards a sustainable path.

The economist said first and foremost it was worth noting that this was an integrated report which means that it covered the entire country’s economic performance which encompasses the banking and non- banking sector. Sibiya noted that despite the tight and restrictive environment, the central bank managed to make some money and paid due dividend to government. It is worth noting that a total of E347.3 million was paid as dividend to government in line with the CBS Order of 1974 (as amended) – following a total comprehensive income of E423.2 million realised by the bank in 2024/25 financial year.

Furthermore, the CBE recorded E251.5 million profit for the year. However, this was a decline of 35 per cent from the E385.8 million profits realised in the previous year.“ They are still reporting a positive income in their balance sheets,” said the economist. The economist further highlighted that another area of interest in the bank’s report was on the Common Monetary Area (CMA) proposed arrangements for equal interest rates. He said Eswatini’s rate has been below that of South Africa by 75 basis points. He said to him that was the bank’s confirmation to the nation to say inasmuch as there were this arrangements but the bank was always cognizant of ensuring that to drive economic growth of the country.

He said such was important for the country not to be pressured by the South African rates but domestic arrangements should also come to play into the determination of the local interest rate. The CBE in consultation with the Monetary Policy Consultative Committee held six ordinary meetings to decide on monetary policy stance during the 2023/24 financial year.During the review period, the CBE pursued a restrictive monetary policy stance in line with tightening regional and global monetary conditions.

The bank held the discount rate at 7.50 per cent keeping a negative differential of 75 basis points against the South African repo rate since July 2023 to date. This policy stance is meant to support economic growth by making credit extension to the private sector relatively cheaper. Sibiya said such was a balancing act to ensure Eswatini’s economy remained sound. He further touched on the Small-Scale Enterprise Loan Guarantee Scheme of which according to the governor it surpassed its Leverage Ratio target of 3.0 times the Fund as it increased from 2.41 times the fund in March 2023 to 3.24 times the Fund balance at the end of March 2024, indicating an increase of 34.44 per cent during the year.

Sibiya noted that initially, the complaint was on the inaccessibility of the Loan Guarantee Schemes. He said now when one looks at the aforementioned leverage ratio, it showed that the scheme was getting fully subscribed to. He said this meant that emaSwati were able to take those loans and further grow their businesses.He said that also contributed to the developments on the credit extended to businesses as it was seen to have also increased.

It is worth noting that during the first three months of 2024, private sector credit continued to rise, reflecting year-on-year growth of 10.3 per cent at the end of March 2024.Dr Mnisi said the increase continued to be driven largely by the business sector which reflected year-on-year growth of 13.8 per cent at the end of March 2024. In the short to medium term, private sector credit growth is likely to remain positive, supported by continuing economic recovery locally, regionally and globally as well as possible interest rate easing.The governor said on the other hand, credit growth may be reduced by economic uncertainties as well as unpredictable weather patterns which may negatively affect agricultural production. In his presentation of the report, the governor highlighted the current challenge within the Development Finance Schemes is the stagnancy of the Export Credit Guarantee Scheme (ECGS).

He said in this regard, various strategic initiatives were being undertaken by the bank in trying to enhance uptake of the ECGS, and one of them is the ‘Developing of Risk Instruments to Support Effective Lending to Specific Key Sectors.’ Dr Mnisi said in advancing its financial inclusion agenda in partnership and collaboration with various stakeholders, the CBE ensures that it continues implementing a sound regulatory framework which allows innovation and expansion of outreach programmes whilst providing mechanisms for managing risks associated with such activities.

The programmes include adequate financial consumer protection and market conduct as well as financial policies that are not gender neutral amongst others, whilst ensuring that the right balance between financial inclusion objectives and financial stability is maintained.The governor said in order to enhance financial inclusion, data availability was crucial in order to facilitate the design and rollout of quality financial products and services to the beneficiaries. He said thus, CBE, in collaboration with other stakeholders, advocates and implements data-driven and evidence-based policy formulation; in particular supporting women and youth financial inclusion,Forcibly displaced people (FDPs), enhancing Digital Finance Infrastructure in fostering inclusion, Financial Literacy to deepen financial inclusion, Inclusive Green Finance within Eswatini – in line with the ongoing Greening the CBE project, among others.