IMF projects over 4 per cent growth, but not enough…

MBABANE – Eswatini’s economy is expected to grow by 4.3 per cent in 2025 and 4.6 per cent in 2026, but structural reforms remain critical to tackle unemployment, poverty and inequality.

While growth in 2025–26 is forecast to pick up due to public and private investment, as the impulse from this investment wanes and in the absence of decisive structural reforms, growth is expected to slow to 2.8 per cent over the medium term, slightly above the historical average of 2.6 per cent.

According to the International Monetary Fund (IMF), this is insufficient to meaningfully reduce unemployment, poverty and inequality.

Heightened global trade tensions and regional conflicts could weigh on Eswatini through weaker external demand, particularly from South Africa, and significant increases in oil prices.

On the upside, an acceleration of global growth, increased FDI and better-than-expected investment implementation could bolster growth.

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Economic gains offset by structural constraints

MBABANE – The IMF report highlights that Eswatini’s economy has shown resilience despite the global economic slowdown, regional instability.

The economy further showed resilience despite the lingering impact of climate shocks such as the 2024 El Niño-induced drought.

Growth in 2024 slowed to 2.8 per cent from 3.4 per cent in 2023, largely due to flat agricultural output even as manufacturing, especially beverages and sugar, and services sectors gained momentum.

Yet, unemployment remains alarmingly high at 34 per cent overall, and 58 per cent among the youth, while income inequality ranks among the worst in sub-Saharan Africa, contributing to a 59 per cent poverty rate. Eswatini also faces severe infrastructure and skills gaps, a heavy reliance on Southern African Customs Union (SACU) receipts and high borrowing costs relative to regional peers. Public debt stands at 39.2 per cent of GDP, but is projected to edge up to 43.5 per cent by 2026 as fiscal deficits persist despite planned consolidation measures.

The IMF warns that several downside risks could derail the country’s medium-term outlook. A global slowdown could significantly weaken export demand, particularly from South Africa, which accounts for over 60 per cent of Eswatini’s exports.

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Efforts must strengthen financial sector resilience

MBABANE – Efforts are needed to strengthen financial sector resilience.

The IMF says legislative actions, including updating the Central Bank Act and amending the FSRA Act, are key to bolstering financial sector resilience.  Additionally, operationalisation of the Emergency Liquidity Assistance (ELA) framework and the deposit insurance scheme will strengthen financial stability. The ELA framework is a key priority to strengthening the broader financial stability safety net.  The CBE should establish an interdepartmental working group to revise the draft ELA regulation in line with IMF TA recommendations. Structural reforms are essential to unlocking private sector-led growth and enhancing long-term potential output.

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Safeguarding the Lilangeni-Rand peg

MBABANE – Eswatini’s currency peg to the South African Rand has anchored price stability and facilitated regional trade.

However, international reserves remain below the IMF’s adequacy thresholds at just 2.1 months of import cover versus the recommended four months.

The IMF advises aligning Eswatini’s policy rate with the South African Reserve Bank (SARB) rate to prevent capital outflows, bolster reserves and safeguard the peg’s credibility. The IMF further noted that the country’s banking sector remains well-capitalised and liquid, but elevated non-performing loans (NPLs) and limited private-sector credit growth pose risks.

The IMF calls for:

• Full implementation of the Financial Sector Stability Review (FSSR) recommendations.
• Operationalisation of the deposit insurance scheme and emergency liquidity facilities.
• Stronger supervision of non-bank financial institutions (NBFIs), which account for 78 per cent of financial sector assets.

The report emphasises that without deep structural reforms, growth will remain too low to tackle unemployment and inequality.

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