GROSS RESERVES UP 15.8%

MBABANE – The country’s gross official reserves were recorded at an increased E10.8 billion at the end of the past month.

This reflected growth of 15.8 per cent month-on-month and 46.3 per cent year-on-year. The sharp increase in reserves was mainly attributed to the quarterly inflow of the Southern African Customs Union (SACU) revenues at the beginning of last month. 

At this level, the reserves were equivalent to an import cover of 4.7 months, higher than the 4.1 observed in September this year.

This is as per the monthly statistical release for September and October from the Central Bank of Eswatini (CBE).

Valued in special drawing rights (SDRs), the reserves improved by 18.4 per cent month-on-month and by 32.7 per cent over the year to settle at SDR 469.2 million at the end of October 2020.

According to Investopedia special drawing, rights refer to an international type of monetary reserve currency created by the International Monetary Fund (IMF) in 1969, that operates as a supplement to the existing money reserves of member countries. 

Created in response to concerns about the limitations of gold and Dollars as the sole means of settling international accounts, SDRs augment international liquidity by supplementing the standard reserve currencies.

Rule

One common rule of thumb is that reserves that can cover three months’ worth of imports are adequate.

Meanwhile, credit extended to the private sector contracted marginally by 0.4 per cent month-on-month and by 1.2 per cent year-on-year to reach E14.8 billion at the end of September 2020.

The month-on-month decline was observed in credit to households and non-profit institutions serving households (NPISH) and businesses. Credit to other sectors on the other hand, depicted an increase over the month of September 2020

Net claims on government by the banking sector, on the other hand, also declined to E417.5 million at the end of September this year from E1.2 billion observed in August 2020. 

significant

The month-on-month fall was on account of significant increase in government deposits held by the banking sector.

“Broad money supply (M2) stood at E19.0 billion at the end of September 2020, reflecting a decline of 0.6 per cent month-on-month and growth of 10.5 per cent over the year on account of both narrow money supply (M1) and quasi money supply.

“Narrow money supply (M1) contracted by 1.1per cent month-on-month, but grew by 5.3 per cent year-on-year to settle at E6.7 billion at the end of September 2020,” reads the report in part.

components

 An analysis of the components of M1 showed that Emalangeni outside depository corporations decreased by 9.9 per cent month-on-month, but grew by 23.7 per cent year-on-year. 

Transferable (demand) deposits, on the other hand, rose by 0.4 per cent month-on-month and 3.0 per cent over the year to settle at E5.8 billion at the end of September 2020. 

“Quasi money supply stood at E12.3 billion at the end of September 2020, reflecting a decline of 0.3per cent month-on-month, but over the year grew by 13.5 per cent. The contraction in quasi money was driven by components, savings and time deposits.

deposits

“Savings deposits fell by 1.6 per cent month-on-month but grew by 2.8 per cent year-on-year to settle at E2.1 billion at the end of September. Similarly, time deposits declined by 0.1 per cent month-on-month, but rose by 15.9 per cent year-on-year toE10.2 billion at the end of September,” reads the report.

The term quasi money refers to assets which can be easily converted to cash because they are in high demand and are issued by entities with excellent creditworthiness.

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