The World Bank has joined a growing chorus of concern over the country’s rapid accumulation of external debt, calling on government to implement a medium-term debt management strategy to safeguard future fiscal stability.
The warning was issued yesterday during the launch of the latest Eswatini Economic Update, where the Bank highlighted the need for closer scrutiny of the country’s debt trajectory amid rising borrowing levels.
The event held at the United Nations building in Mbabane was graced by Minister of Economic Planning and Development Dr Tambo Gina, Minister of Finance Neal Rijkenberg, Minister of Information, Communication and Technology Savannah Maziya and United Nations Resident Coordinator George Wachira.
Also in attendance were the World Bank Eswatini Resident Representative Ikechi Okorie, British High Commissioner to Eswatini Collin Wells and the United Nations Development Programme’s Resident Representative Henrik Franklin.
The Bretton Woods institution’s caution adds further weight to recent concerns raised by the Central Bank of Eswatini and independent economists, who have questioned the pace and scale of government’s borrowing spree.
In its latest Monetary Policy Statement, the bank described the country’s public debt-to-GDP ratio as still contained, but potentially vulnerable given the recent and pending debt commitments.
The CBE’s warning came on the same day that Parliament published a notice inviting public comments on three new loan bills, totalling over E3.5 billion, that would further increase the country’s debt burden.
Making his presentation on the country’s recent economic developments and outlook, the World Bank’s Senior Country Economist for Eswatini Marko Kwaramba, said while the country has recorded strong economic growth in recent years, its debt trajectory now requires careful attention and strategic intervention.
“Debt levels are on the rise, and this also requires close monitoring,” Kwaramba said, adding that although economic growth has been strong, outperforming most countries in the region, it has increasingly relied on debt-financed investments that are not yet yielding sufficient structural transformation or poverty reduction.
While recognising that public investment has driven a five per cent projected growth rate for 2025, Kwaramba cautioned that this growth remains concentrated in a few sectors, including construction and mining, which are capital-intensive and limited in job creation and poverty alleviation.
“There is a need to strengthen public finances and address structural economic transformation,” he said, stating that without reforms, the current growth path may be unsustainable. The Economic Update, themed “Harnessing the Potential of Digital Technologies for Eswatini’s Growth and Job Creation”, highlighted digitalisation as a central pillar for sustaining economic growth.
Kwaramba also said the consistency of growth drivers remained weak, shifting between sectors as well as failing to achieve broad-based transformation.
He pointed out that digitalisation could enhance productivity, reduce unemployment and boost domestic revenues by modernising tax collection and public procurement.
“The message we are giving is that for growth to be consistent, Eswatini needs to digitalise, strengthen public finance, and address structural economic constraints,” he said.
He echoed statements made earlier by the Minister of Finance, Neal Rijkenberg and the World Bank’s Country Representative Ikechi Okorie, who both identified digitalisation as essential to achieving the country’s ambition of double-digit growth.
The update highlighted that fully implementing e-procurement systems and digital revenue collection could result in up to 4% revenue gains and reduce corruption.
Other countries, including Mauritius, have seen digital sectors contribute up to six per cent of GDP.
Kwaramba also pointed to macroeconomic risks, particularly in relation to South Africa.
He warned that real returns on investment in South Africa have become more attractive due to its lowest inflation levels in five years, a factor that may trigger capital flight from Eswatini.
While inflation in the country has declined from five per cent to 2.8% in the first half of 2024, aided by the cooling of global food and fuel prices. He further warned that without intervention, the widening interest rate differential between Eswatini and South Africa could incentivize investors and financial institutions to move capital out of the country.
“There needs to be careful monitoring to prevent this from leading to a financial collapse,” he said.
The World Bank economist also called attention to a significant shift in the country’s external sector and shone light on the fact that although the country is currently enjoying a high current account surplus, changes in trade dynamics and increased capital imports linked to investment projects have started to erode international reserves.
The update further revealed that international reserves declined to around 2.4 months of import cover in April 2024, a trend that, if sustained, could destabilise macroeconomic stability.
Kwaramba attributed the change to three main factors, declining SACU receipts, increased investment-related imports, and an emerging service trade deficit.
“These changes suggest a structural shift in the economy. Authorities must pay attention to ensure that macroeconomic stability is maintained,” he explained.
Despite strong headline growth, the World Bank noted that poverty and unemployment levels remain stubbornly high.
Kwaramba stated that although poverty indicators appear to be rising, this is largely due to improved data coverage and a revised international poverty line.
He warned that growth driven by a narrow set of capital-intensive sectors would not be enough to reduce poverty or create widespread employment.
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