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SLIGHT DECLINE IN NON-PERFORMING LOANS

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MBABANE – There was slight decline in the stock of non‑performing loans  towards the end of the past year.

The figures fell by 0.3 per cent to settle at E690.1 million at the end of November 2020. This was due to a combination of an accommodative monetary policy stance by the Central Bank of Eswatini and other prudential measures taken by both the CBE and commercial banks  A non-performing loan (NPL) is one in which the borrower is in default and has not made any scheduled payments of principal or interest for some time. In banking, commercial loans are considered nonperforming if the borrower is 90 days past due.

Figures

There were fears in the past that figures of non-performing loans could dramatically shoot up in the past years as individuals and businesses were in distress due to the advent of COVID-19. The figures were confirmed in a monetary policy statement released by the CBE three days ago. The CBE together with the Monetary Policy Consultative Committee (MPCC) held a meeting to consider the appropriate monetary policy stance. The outcome of the meeting was headlined by the decision to maintain the interest rate at 3.75 per cent. This means banks are expected to maintain the 7.25 per cent prime lending rate on loans extended to businesses and individuals. “Taking into consideration relevant global, regional, and domestic factors, and the price and financial stability mandate, the Bank decided to maintain the discount rate at 3.75 per cent."

Activity

“The resurgence of COVID‑19 is expected to weigh adversely on global economic activity; however, the rollout of vaccines is expected to slow the rate of infection and have a positive effect on global growth prospects generally,” reported CBE. Meanwhile, according to the statement from the CBE Governor Majozi Sithole, forecasts indicate that inflation will rise to 5.42 per cent in 2021(from 5.38 per cent) and will moderate to 5.25 per cent in 2022 (from 5.29 per cent). The upward revision in 2021 is due to an expected increase in oil prices and domestic administered prices while the moderation in 2022 is due to an expected appreciation of the exchange rate and the prospects of a successful roll‑out of the COVID‑19 vaccine which would normalise global economic activity.

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