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GOVT ARREARS DOUBLE

21/12/2018 00:31:00 BY KWANELE DHLADHLA

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MBABANE – Government arrears have almost doubled since June 2017, growing from E1.7 billion to E3 billion in June 2018.
As at July 2018, government arrears stood at E2.4 billion.

In the Central Bank of Eswatini (CBE) Financial Stability Report (FSR) 2018 presented by Governor Majozi Sithole on Wednesday, it was warned that government’s arrears accumulation continued to be a source of vulnerability for financial stability as highlighted in their previous report.
CBE explained that in a bid to prevent unsustainable arrears accumulation, government issued promissory notes to suppliers, suppliers’ bonds and infrastructure bonds.

“While the promissory notes give government more time to repay its suppliers, reputational risk may make the issuance of these securities more expensive in the medium term given the prevailing fiscal challenges. Infrastructure bonds are solely meant to finance specific capital projects, while suppliers’ bonds mainly target small and medium enterprises owed by government,” reads the report in part.

During the year ending in March 2018, the bank reportedly advanced E1.3 billion to government, marginally higher than the E1.1 billion advanced in the preceding fiscal year.

According to the March 2018 CBE quarterly report, the advance was repaid and re-advanced to government in the financial year beginning in March 2018.
Subsequently, government restructured its bank advance to six, seven and eight-year bonds effective April 2018, a more accommodative structure than the previous maturity of six months which is meant to give government some fiscal space.

The CBE pointed out that a combination of slow economic growth and declining Southern African Customs Union (SACU) revenue resulting in growing public debt had put the government debt-to-GDP ratio on an upward trajectory.

In June 2018, Eswatini’s total government debt-to-GDP ratio stood at 21.0 per cent, six percentage points higher than observed in June 2017. During the same month of 2018, domestic government debt stood at E7.7 billion, an equivalent of 12.5 per cent of GDP.