Economic fundamentals getting stronger – Business Eswatini

AT a glance, the monetary statement may appear subdued, but behind the numbers and ratios is a positive economic story.

Business Eswatini Chief Executive Officer (CEO) E. Nathi Dlamini said the country’s economic fundamentals seemed to be getting stronger each passing month, but cited a worrying trend about the foreign exchange reserves, as they have consistently come under three months.

Dlamini said this was particularly worrying given that the country enjoyed a healthy trade surplus and the current account was positive.

He said one had to establish the cause of the foreign currency outflows to determine whether or not it was due to repatriation of profits by foreign entities or it was something else altogether.

He said the inspiring news however was that the gross domestic product (GDP) numbers remained well above 5%, which he said was generally considered a healthy figure supported by one of the lowest inflation figures in many years at 2.3%.

The CEO said this essentially suggested that the Central Bank of Eswatini (CBE) monetary policy posture has been effective in taming inflation and stabilising market places, much to the benefit of consumers.

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“Credit extension to the private sector has shown very good growth at around 8% year-on-year, which means that business confidence was back and companies were, again, investing in their operations. That was a very good thing.

However, the jury is still out when it comes to determining the number of jobs to be created by this growth. As everyone agrees, the elephant in the room is the lack of jobs, which our economy has struggled to create fast enough to keep up with demand. A national conversation about job creation needs to be held if the situation persists unabated,” added Dlamini.

Dlamini further noted that the private sector welcomed the decision that interest rates remain unchanged.

He said they would have preferred a rate cut. He explained that the bank rate which was the overnight borrowing rate, would remain at 6.75% while the prime rate which is the best rate banks lend to customers would remain at 10.25%.

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He said some observers including businesses have argued that with inflation way down, a rate cut was necessary this time around, which he said was not entirely wrong.

The CEO said the inflation projections for 2027 already hovers around 4% which means a conservative monetary policy intervention was justified.

“The counter-argument, however, is that the central bank took a cautionary stance against the backdrop of many unknown geopolitical variables and international trade inconsistencies which may impact inflation going forward.

“Notwithstanding the above though, many of us are banking on a rate cut of at least 25 basis points next quarter if, of course, everything remains equal. We also hope that our economy continues to grow stronger and create the number of jobs we yearn for especially for our young people,” further stated Dlamini.