MBABANE – The Central Bank of Eswatini (CBE) has surprised markets by maintaining its discount rate at 6.75 per cent despite neighbouring South Africa raising its interest rate by 25 basis points to 7.0 per cent.
The CBE’s decision signalled what analysts describe as a cautious ‘wait-and-see’ approach amid mounting inflation risks.
The decision, announced by Central Bank Governor Dr Phil Mnisi following the Monetary Policy Consultative Committee (MPCC) meeting held on Friday, came against expectations that Eswatini would mirror the South African Reserve Bank’s (SARB) latest move in order to preserve monetary policy alignment within the Common Monetary Area.
Instead, policymakers opted to keep borrowing costs unchanged, citing the need to closely monitor the economic fallout from escalating geopolitical tensions in the Middle East and their impact on global oil prices.
“The bank decided to maintain the discount rate at 6.75 per cent,” Dr Mnisi said in the monetary policy statement, noting that while macroeconomic fundamentals had weakened, policymakers preferred a cautious approach as they assessed emerging risks.
The decision means commercial banks are expected to maintain the prime lending rate at 10.25 per cent for households and businesses until the next monetary policy meeting.
The outcome was notable because South Africa’s central bank had only hours earlier increased its repo rate by 25 basis points to 7.0 per cent, citing heightened inflationary pressures driven largely by rising energy costs.
For years, monetary policy decisions in Eswatini have generally moved in tandem with those of South Africa due to the close economic and financial links between the two economies.
However, economists had increasingly argued that domestic economic conditions gave the CBE room to diverge from Pretoria’s decision.
Among them was Economist Sanele Sibiya, who told the Times of Eswatini Business Desk before the meeting that the domestic inflation environment still provided sufficient space for the bank to keep rates unchanged.
“Given domestic conditions, the CBE has scope to keep interest rates steady during this MPCC meeting,” Sibiya had said. His assessment appears to have been vindicated by the central bank’s latest decision.
Although inflation in Eswatini has begun to edge upwards, it remains significantly below levels that would ordinarily trigger an aggressive monetary response.
Latest figures show headline inflation rose to 2.0 per cent in April 2026 from 1.6 per cent in March, driven primarily by increases in housing and utilities, transport, restaurants and hotels, as well as a sharp rebound in fuel prices.
Liquid fuel prices accelerated by 23.3 per cent in April compared to a 5.5 per cent decline recorded in the previous month. Despite this upward movement, inflation remains relatively subdued by both regional and historical standards.
The CBE has revised its inflation forecast upward to 3.31 per cent for 2026 from the 3.27 per cent projected in March, while the 2027 forecast has also been raised to 3.74 per cent from 3.48 per cent. Even with those upward revisions, inflation remains broadly consistent with price stability objectives. What is particularly significant is that inflation remains within the newer inflation-targeting framework adopted in South Africa.
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