ESWATINI INTEREST RATE 2ND LOWEST

MBABANE – The cut in the interest rate has made the Eswatini figures to be one of the favourable among its peers in the CMA.

CMA is the Common Monetary Area (CMA) which links South Africa, Namibia, Lesotho and Eswatini into a monetary union. It is allied to the Southern African Customs Union (SACU). The main purpose of this trade is that all of the parties can have the same development and equitable economic advance so they can be treated as a whole. In response to global, regional and domestic economic developments, especially the impact of the coronavirus pandemic, Central Bank of Eswatini (CBE) Governor Majozi Sithole announced a decision to slash the interest rate by 100 basis points from 6.5 to 5.5 per cent on Friday. CBE, together with the Monetary Policy Consultative Committee (MPCC), held a meeting to consider the appropriate monetary policy stance for the upcoming two months. This means banks will now reduce their lending rates on loans dispersed to individuals and businesses until the next monetary policy meeting.

Indicting

Worth mentioning is that inflation has increased from 2.7 per cent in January to 2.8 in February. Overall inflation remains low, indicating that the increase in the cost of goods and services is slow. Comparisons done by this publication show that Eswatini’s 5.5 rate is now second lowest in the CMA. The lowest figures are those of South Africa following the neighbouring country’s Reserve Bank’s decision to also cut its rate by 100 basis points (bps) to 5.25 per cent during its March 2020 meeting on Thursday, surprising markets who expected a smaller 50 bps cut, amid growing uncertainty over the impact of the coronavirus crisis on the already fragile economy.

Stimulate

The Bank of Namibia, on the other hand, trimmed its benchmark repo rate by 25 bps to 6.25 per cent during its February 2020 meeting, to stimulate the economy and maintain the one-to-one link between the Namibian Dollar and the South African rand. Like Namibia, the benchmark interest rate in Lesotho was last recorded at 6.25 per cent late in January this year.
Meanwhile, Sithole highlighted that the positive differential between the South African repo rate and the Eswatini discount rate was giving the Central Bank monetary policy space should a change in the current stance be required.

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