Interest rate remains at 7.5% for the fourth time
. . . Banks expected to maintain the prime lending rate on loans extended to individuals and businesses at 11.0 per cent until the next monetary policy meeting
THE Central Bank of Eswatini (CBE) has resolved to keep the interest rate unchanged at 7.5 per cent for the fourth successive time since September 2023.
According to a Monetary Policy Statement released by CBE Governor, Dr. Phil Mnisi, the decision to keep the rate unchanged was taken after a meeting on Thursday of the Central Bank and the Monetary Consultative Committee (MPCC) where the appropriate monetary stance was taken considering the relevant global, regional and domestic economic factors as well as the price and financial stability mandate.
“On the global front, the IMF made an upward revision of its global economic growth forecast for 2024 to 3.1 per cent (from a projection of 2.9 per cent in October 2023) while the forecast for 2025 remained unchanged at 3.2 per cent. The improvement in the 2024 forecast is on account of better resilience in the USA and several large emerging markets and developing economies,” Mnisi said in a statement.
“Monetary policy conditions, at the global level, are steadily at restrictive levels. Global headline inflation is forecasted to decelerate from 6.8 per cent in 2023 to 5.8 per cent (same as previous forecast in October 2023) in 2024 and further down to 4.4 per cent (from 4.6 per cent) in 2025,” part of the statement reads.
Mnisi said the bank will continue to monitor international and domestic developments that influence the movements of inflation and will act appropriately in line with its mission to foster price and financial stability that is conducive to the economic development in Eswatini.
Mnisi said the CBE anticipates that the costs of goods and services to increase moderately in 2024. The CBE maintained its inflation forecasts for 2024 at 4.9 per cent.
“On the domestic front, economic activity as measured by the quarterly gross domestic product, grew by a slower 7.7 per cent yearon-year (seasonally adjusted) in the third quarter of 2023, down from a revised 8.2 per cent in the second quarter. The primary and secondary sectors recorded slower increases (on a year-on-year basis) in the quarter under review, while the tertiary sector remained resilient on double-digit growth. On a quarter-on-quarter basis, economic activity grew by 3.0 per cent (seasonally adjusted) in the quarter under review, from a revised growth of 1.3 per cent in the previous quarter,” the statement from the Governor reads in part.
The country’s annual headline inflation slowed to 4.3 per cent in February 2024 from 4.5 per cent in January 2024. The decrease was mainly due to a slowdown in food prices, which grew by a slower 4.4 per cent in February 2024 from 56 per cent in the previous month, transport which moderated to 1.1 per cent in February 2024 from 1.3 per cent in the previous month: clothing and footwear which declined by 0.8 of a percentage point to 4.9 per cent in February 2024 and recreation and culture which slowed from 4.8 per cent in January 2024 to 3.3 per cent in February 2024.
These decreases were counteracted by increases observed in the price indices for housing and utilities which grew by 8.1 per cent in February 2024 from 7.7 per cent in the previous month and household furniture and maintenance which rose by 10 per cent to 4.5 per cent in February.
The bank maintained its headline inflation forecast for 2024 at 4.91 per cent while the medium-term forecasts were revised up to 5.21 per cent (from 5.13 per cent that was forecast in January 2024) for 2025 and 5.37 per cent from 5.25 per cent for 2026. Risks to the inflation outlook include elevated crude oil prices, a weaker exchange rate and an increase in administered prices, among others.
The statement further states that credit to the private sector decreased by 2.2 per cent month-on-month to settle at E18.7 billion at the end of January 2024. Credit extended to the business sector declined by 3.6 per cent to close at E9.4 billion at the end of January 2024 and credit extended to other sectors of the economy also declined by 9.1 per cent to E896.6 million at the end of January 2024.
Credit extended to the household and NPISH sector improved by 0.2 per cent to close at E8.5 billion at the end of January 2024.
The banking sector’s non-performing loans (NPL) rose by 2.6 per cent to reach E1.1 billion at the end of January 2024. Consequently, the ratio of the NPLs to gross loans grew by 0.2 of a percentage point month-to-month to 7.0 per cent at the end of January 2024.
As of March 22, 2024, gross official reserves stood at E7.8 billion equivalent to an import cover of 2.3 months. As of the end of February, total public debt stock stood at E34.5 billion, which is equivalent to 37.2 per cent of GDP.
This reflects a 3.6 per cent increase compared to the E33.4 billion recorded the previous month, mainly driven by an increase in both external and domestic debt.