By KWANELE DHLADHLA | 2020-10-18
Eswatini’s debt stock has reached a level which best can be defined as ‘very concerning’ or alarming.
This strong observation was made by an economist who works with the State soon after being informed that the latest statistics from the Central Bank of Eswatini reflect that total debt stock stood at E26.2 billion at the end of September 2020, an equivalent of 41.5 per cent to Gross Domestic Product (GDP). CBE said this was an increase of 11 per cent when compared to E23.6 billion recorded in the previous month.
The economist, who preferred anonymity on the basis that he had not been mandated to engage the media, explained that his assertion to the effect that the kingdom’s debt stock had reached alarming levels was based on the recent International Monetary Fund (IMF) report that debt should at least remain below 35 per cent of GDP for sustainability purposes. However, he was quick to point out that the debt was bound to be increased as government grapples with the devastating effects of the COVID-19 pandemic.
“With revenues being reduced to far less than what had been projected while expenditure remains the same, the debt stock was bound to increase,” he opined.
CBE disclosed that total public external debt increased from E9.3 billion in August 2020 to E11.1 billion in September 2020, reaching 17.6 per cent to GDP which showed an increase of 19.3 per cent when compared to the previous month.
“The significant jump can largely be attributed to the full disbursement of the IMF Rapid Response to budget support loan amounting to E1.96 billion during the month of September 2020. Outstanding public domestic debt stood at E15.1 billion at the end of September 2020, an equivalent of 23.9 per cent to GDP. This shows that domestic debt increased by 5.6 per cent from E14.3 billion recorded in August 2020.
“The increase can be attributed to an additional advance extended to government as well as issuance of suppliers’ bonds,” CBE explained.
It should be mentioned that government announced bonds valued E200 million earlier this week. The coupon rates for the bonds whose auction date will be October 27 was fixed at 9.4 per cent, 9.85 per cent, 10.25 per cent and 10.50 per cent. It was explained that the bonds were being issued using the competitive multiple bid auction model and open to the public including individuals, corporate and institutional investors.
CBE said all investors should apply through the primary dealers who are the four commercial banks.
“The purpose of the issuance is to develop the secondary market, establish a fair market price which will compensate both the borrower and investors for interest rate risks and to facilitate financial intermediation while also meeting government budgetary requirements,” added CBE.
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