PUBLIC DEBT SOARS BY 4.6% TO E13.5BN

MBABANE – Preliminary figures indicate that total public debt stood at E13.5 billion, an equivalent of 21.6 per cent of GDP at the end of August 2018.

The Central Bank of Eswatini (CBE), whose Governor is Majozi Sithole, said this reflected an increase of 4.6 per cent from the E12.9 billion recorded in July 2018.

At the end of August 2018, public external debt stood at E5.5 billion, an equivalent of 8.9 per cent of Gross Domestic Product (GDP).
This shows that external debt increased by 5.8 per cent from the previous month. The increase was mainly attributed to the depreciation of the Lilangeni against the US Dollar and other major currencies in which the country’s liabilities are denominated.

During the month of August 2018, CBE said the Lilangeni/Rand exchange rate weakened against major currencies and showed signs of volatility.
“Public domestic debt stood at E7.9 billion at the end of August 2018, an equivalent of 12.6 per cent to GDP. Domestic debt increased by 2.6 per cent when compared to the previous month. The marginal increase was a result of Plain Vanilla Bonds issued during the month, which was nevertheless offset by maturities during the same period,” CBE reported.

Investopedia explains that a plain vanilla bond refers to a bond without any unusual features. It is one of the simplest forms of bond with a fixed coupon and a defined maturity and is usually issued and redeemed at the face value. It is also known as a straight bond or a bullet bond.
Four papers were issued in the month of August with the amount offered totalling E150 million. The papers on offer were three, five, seven and 10-year bonds.
Total bids received for these papers amounted to E254.12 million resulting in a bid-cover ratio of 169.4 per cent. Allotments made totalled to E205.07 million, an allotment rate of 136.7 per cent. The allotments were more than the amount offered as the issuer reserves the right to allot a maximum of 50 per cent more than the amount on offer.

Panic

Economist Thembinkosi Dube said the current rate of public debt provided no reason to press panic buttons as yet. He said it was still at manageable levels but should be watched closely at the rate in which it increases over the long term.
“We are still fine for now but government should be vigilant in the manner it accumulates more debt going forward through interrogating all risk factors before committing itself both domestically and externally,” Dube warned.

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