E1.13BN PAYMENT HOLIDAY RELIEF

MBABANE – Relief measures in the form of payment holidays to cushion customers from the effects of COVID-19 were valued over E1 billion.

National lockdowns, implemented from March last year to fight the rapid spread of the virus, had an enormous negative impact on businesses. To mitigate the effects of COVID-19 on the banking sector, The Central Bank of Eswatini (CBE) introduced relief measures through Inspection Circular No.1 of 2020, which banks implemented to assist their customers. Furthermore, the CBE utilised other prudential tools including lowering liquidity and cash reserve thresholds as well as lowering policy rates.

CBE Governor Majozi Sithole, in his monetary policy statement, which was delivered virtually yesterday, disclosed that through the relief measures, more than 2 200 customers in aggregate with a total relief value of E1.13 billion benefitted by means of payment holidays. “The payment holidays ranged between three to six months and were granted on case by case basis. The intervention certainly provided significant relief to the borrowers who would have otherwise been troubled by the COVID-19 induced economic/financial distress,” said Sithole. Furthermore, by the reduction of the liquidity requirement and reserve requirement by 500 basis points and 100 basis points respectively resulted to about E2 billion of liquidity released to help cushion the banks and allow them to continue lending amid the pandemic. “Indeed, total gross loans and advances increased by 9.57 per cent from E11.8 billion in March 2020 to E12.9 billion in December 2020,” shared the governor.

Meanwhile, following a significant cut of the repo rate to a low 3.75 per cent in the past year, Sithole said in the short to medium-term, monetary policy was envisaged to remain accommodative, to support economic growth in light of the daring effects of the COVID-19 pandemic while being cognisant of inflationary pressures which might require a mildly contractionary monetary policy stance. The bank reduced the discount rate by a cumulative 275 basis points from 6.50 per cent in February 2020 to 3.75 per cent in July 2020 in an effort to support economic growth in the midst of the COVID-19 pandemic.

Monitor

“The bank will thus monitor such developments and respond appropriately in order to maintain price stability supportive to economic growth,” he said. The economy of the country was not spared from a recession in   the past year. Economic growth, as measured by real Gross Domestic Product (GDP), is estimated to have contracted by 2.4 per cent in 2020 from 2.2 per cent expansion in 2019, with a sharper decline observed during the second quarter of the year.

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