ǤǤǤ Increasing banks’ NPLs concerns IMF
MBABANE – The International Monitory Fund (IMF) has noted that banks’ non-performing loans (NPL) appear to be rising to their pre-pandemic level and average around 8 per cent against relatively low provisions, about 50 per cent as of March 2023.
This is according to the technical assistance report on the financial sector stability review for the Kingdom of Eswatini. The report was prepared by the IMF monetary and capital markets and statistics departments.
Stability
At the request of the Central Bank of Eswatini (CBE), an IMF Financial Sector Stability Review (FSSR) was conducted virtually and in person between April 26 and July 18, 2023. It was noted that Eswatini’s financial system was dominated by nonbanks-a source of most financial stability risks and vulnerabilities-whose oversight is in the most need of improvement. The IMF experts noted that the nearterm economic outlook points to a continued recovery but downside risks remain. Real GDP is projected to grow by 3.2 per cent in 2023 and inflation to stabilise at around 5-6 per cent.
Downside risks stem from ongoing economic challenges in South Africa; the prospective impact of El Nino on agricultural output, food prices, and food security; the dampening effects of high inflation on disposable income; and the impact of a high interest rate environment on new investments, corporate balances sheets (via higher debt service), and in turn higher NPLs in financial institutions. It was reported that as interest rates are rising, household vulnerabilities could pose risks to financial stability. As loans at flexible interest rates dominate, households are seeing their interest payments increase.