Economist Thembinkosi Dube says the country’s repo rate is highly likely to remain unchanged.
This follows South African Reserve Bank (SARB) Governor Lesetja Kganyago’s announcement that the repo (repurchase) rate remains unchanged in South Africa.
The repurchase rate (repo rate) is the interest rate at which a country’s central bank lends short-term funds to commercial banks, often against government securities.
It is a primary monetary policy tool used to control inflation and manage liquidity; higher rates curb inflation by making borrowing expensive, while lower rates stimulate economic growth.
This comes as the Lilangeni is gaining strength while the United States Dollar continues to weaken. The Dollar to Lilangeni exchange rate currently stands at E15.66.
According to IOL News, the Dollar slumped to its lowest level since early 2022 after United States of America (USA) President Donald Trump indicated that he was comfortable with its decline.
Dube also said the discount rate and prime rate would remain unchanged at 6.75% and 10.25%, respectively.
Central Bank of Eswatini (CBE) Governor Dr Phil Mnisi is expected to address the nation during the Monetary Policy Statement today.
“It is highly likely that the repo rate will remain unchanged. It is also not good if we are not at par with South Africa; it brings costs to the country that affect the financial status,” said Dube.
“Regardless of that, there is nothing that gives the governor pressure for changes because the inflation rate has stabilised and the change in the United States Dollar value is still short. It is early to expect any monetary policy change at present, maybe in the next quarter,” Dube stated.
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The economist said President Trump’s administrative policies have caused the Lilangeni to gain strength against the Dollar.
He noted that the Dollar has depreciated since August from over E17 per Dollar, and that since the beginning of the month, the decline had pushed further into the E15 range, particularly following decisions made on January 20.
He said the Dollar’s weakening had advantages, especially for consumers and imports purchased in Dollars.
He emphasised that the value of commodities had not changed, but that what had changed was the foreign exchange rate.
“If a company imported a lot of items in Dollars, we are expecting the cost to decrease. We anticipate fuel costs to decrease as well in the next few days since we buy oil in Dollars. As a result, we would expect inflation to drop as well and that is the advantage to us as consumers.
“However, on the downside, it is the exporter who will receive less for the same commodities. The sugar industry is into exporting sugar, so they will have problems because the consignment which was paid E180 million will now be paid E150 million, meaning there is an E30 million deficit because of forex,” he said.
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Dube emphasised that exporters would be hit hardest, warning that if the situation became severe, it could lead to retrenchments due to high operational costs.
“With local companies that do not export, salaries would remain the same and the change would not have many effects.
“This can also dampen African Growth and Opportunity Act (AGOA) prospects, since many exporters receive significant revenue from foreign sales.
“Basically, for the consumer this is good, and for the exporter it is bad, especially if this shrinks further, maybe to E10 per Dollar,” Dube added.
