E271.4M PROFIT FOR CENTRAL BANK

MBABANE – The Central Bank of Eswatini (CBE) has rebounded from last year’s major loss.

Operationally, the bank made a profit of E271.4 million in the 2020/21financial year, which was a complete shift from the E177.6 million loss registered the previous financial year. This was a result of suppressed normal expenditure caused by the effects of  the coronavirus pandemic which meant a ban on travel and working away from office buildings which significantly reduced staff training, travel, utility and other maintenance expenses.

Report

This is as per the CBE 2020/21 Annual Integrated Report, which was presented virtually by Governor Majozi Sithole yesterday. According to the report, in 2020/21, normal expenditure was stifled by the onset of the pandemic which meant a ban on travel and working away from office buildings which significantly reduced staff training, travel, utility and other maintenance expenses. “Profit for the year has been arrived at after charging staff costs, repairs and maintenance, directors and audit fees, depreciation, impairment losses on financial assets and all other operating expenses,” highlighted the report.
Meanwhile, when it came to the overall banking sector; it was highlighted that it remained safe, sound and stable even though its profitability levels declined due to the COVID‑19 pandemic; low interest rate environment and the sluggish economy.

Liquidity

Commercial banks are said to have remained adequately capitalised and maintained  adequate levels of liquidity. “Despite the struggling economy and declining profitability, asset quality improved over the year. Non-performing loans (NPLs) declined to 5.6 per cent in March 2021 from 7.0 per cent the previous reporting year. The positive impact realised on containment of NPLs was partly a result of implementation of Circular No. 1 of 2020 referred to as the Circular on Policy and Regulatory.

Relief Measures and Guidance to banks in Response to COVID‑19 issued by the Central Bank,” shared CBE. Meanwhile, the country is also said to have registered an overall balance of payments surplus of E1.712 billion in the year 2020 after a E119.3 million deficit the previous year. The surplus was largely due to an injection by the IMF to Eswatini as emergency assistance. The overall surplus was largely due to an injection by the IMF to Eswatini as emergency assistance through the Rapid Financing Instrument (RFI) and wider current account surplus recorded in 2020. In July last year, the country got US$110.4 million (about E1.74 billion) in yesterday’s exchange rate.

Disruptions

Governor Sithole, on the other hand, said overall, the financial sector remained resilient to the economic disruptions associated with the COVID-19 pandemic. The pandemic has led to an unprecedented contraction in economic activity and heightened risks to global financial stability. “Domestic factors including the exchange rates and interest rates have played a key role in keeping overall financial conditions relatively supportive. “The financial sector and the household sector have remained generally resilient after the initial COVID-19 shock, although vulnerabilities may begin to emerge, as the pandemic conditions remain uncertain,” he said.

In light of the disruptions caused by COVID-19, the economy of Eswatini was not spared from a recession in 2020. Economic growth, as measured by real gross domestic product (GDP), is estimated to have contracted by 1.9 per cent in 2020 f r o m  a revised 2.6 p e r  c e n t expansion in 2019, with a sharper decline observed during the second quarter of the year.

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