Times Of Swaziland: LOCAL POLICY RATE SHOULD ALIGN WITH SA RESERVE BANK

LOCAL POLICY RATE SHOULD ALIGN WITH SA RESERVE BANK
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Nhlanganiso Mkhonta on 02/10/2024 14:27:00


MBABANE – Given Eswatini’s peg to the Rand, the policy rate should be
realigned with the South Africa Reserve Bank (SARB).
The International Monetary Fund (IMF) said this will also obviate the need for
potentially distortionary stopgap measures. In the absence of immediate
inflationary pressures, this realignment can occur gradually.
Engaged
In a previous interview, when reacting to this, the Central Bank of Eswatini
Governor, Dr Phil Mnisi, said indeed they engaged with IMF officials, who
expressed their opinion, and as the bank, they respected that opinion.He said,
however, it did not mean they would just wake up and attempt to close the
aforementioned 75 basis points gap between Eswatini’s policy rate and that of
the SARB. He said as the bank, they have their own fundamentals, which inform
the country’s monetary policy.
Fundamentals
The governor acknowledged that because of the pegging of the Lilangeni to the
Rand, ordinarily, one would expect the same interest rate, but that was not a
given and it should be informed by macroeconomic fundamentals, which informed
the policy decision. The IMF staff said they stand ready to assist the
authorities in modernising the liquidity management framework and strengthening
financial sector surveillance, including its AML/CFT aspects. The package of
financial law amendments paves the way to a comprehensive modernisation of the
financial system. Before their adoption by Parliament, the amendments should be
reviewed to ensure that they conform to international standards. The IMF staff
stand ready to assist with this task.
Challenges
Raising potential growth faces many structural challenges, including a poor
business environment and weak governance. More efforts are needed to support
entrepreneurship, financial literacy and credit to micro, small and medium
enterprises. Stepped-up anti-corruption plans are well noted as governance
remains high among challenges of doing business, and negative perceptions in
this regard limit Eswatini’s attractiveness for foreign investors.