CENTRAL BANK MAINTAINS REPO RATE

MBABANE – The Central Bank of Eswatini (CBE) Monetary Policy Consultative Committee (MPCC) has deviated from the norm of following suit of what their South African counterparts do.

This is because the CBE has retained the repo rate at 6.25 per cent while the South African Reserve Bank’s MPC decided to reduce it by 25 basis points to 6.25 per cent from 6.5 per cent.
The repo rate is the interest paid on loans extended by the central bank to commercial banks or other depository institutions and it is used as a measure to reduce liquidity problems and the pressures of reserve requirements. The variation to be paid by local banks to the CBE is 0.25 basis points above their counterparts in South Africa. The CBE and the MPC came to this decision last Friday after considering global, regional and domestic economic developments.Their implementation of maintaining the 6.5 per cent started on Saturday (January 18, 2020). 

Meanwhile, the South African Reserve Bank implemented this decision last Thursday amid struggles to grow the economy and the inflation consistently surprising on the downside. The modelling done by the Reserve Bank pointed to the possibility of another cut in the fourth quarter of 2020, though it cautioned that this could change due to new developments, and changing data and risks. On the other hand, the CBE through its Governor Majozi Sithole, reported that locally, on the global front, the gross domestic product (GDP) is expected to average three per cent in 2019, rising to 3.4 per cent in 2020.

“Recent months data indicates that global trade and manufacturing have somewhat stabilised suggesting upward growth. Downside risks to global growth include geopolitical developments, trade tensions, oil price shocks, and high levels of corporate and sovereign debt.” Sithole said inflation in advanced economies remained stable while global monetary policy remained largely accommodative. It reported that the South African economy, which was a proxy for regional developments, contracted by 0.6 per cent in the third quarter of 2019 following a growth of 3.2 per cent in the second quarter.

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