ESWATINI BEGINS YEAR WITH 2ND LOWEST DEBT

MBABANE – The country is starting the new year with a debt ratio that is relatively low when compared to some of its SACU peers.

Eswatini is a member of the Southern African Customs Union (SACU) alongside Botswana, Lesotho, Namibia and South Africa. The country’s debt ratio in the past year was last recorded at E26.8 billion, translating to an equivalent of 38.4 per cent of gross domestic product (GDP). These figures do not make for riveting reading, but they provide an opportunity for debt stabilising, as they are second lowest in SACU. The lowest debt ratio in the region in 2021 was for Botswana at approximately 22.77 per cent of the GDP.

The worst figures in the year under review were for Namibia. The national debt of the latter amounted to approximately 69.92 per cent of the GDP. Namibia was closely followed by regional heavyweight South Africa. Gross debt for the neighbouring country was at 69.9 per cent of GDP in 2021 or E4. 31 trillion. The national debt of Lesotho amounted to approximately 50.02 per cent of the GDP.

According to the International Monetary Fund’s 2020 Debt Sustainability Analysis, if Eswatini implemented its 2021–23 fiscal adjustment plan (totaling 6.5 per cent of GDP), public debt was going to rise to about 50 per cent of GDP last year to reach a high of 53 per cent of GDP in 2023, then gradually decline.
Meanwhile, experts say a lower ratio of this number is always preferred as it means the economy is well balanced in terms of its total GDP when compared to debt. Similarly, a higher ratio may be alarming and may signal to the economy going to default.

A low debt GDP ratio is always preferable because it means a country is producing and selling goods and has sufficient ability to pay back its debt by taking any further debt. As the debt to gross domestic product ratio for a country rises, the risk of it becoming a default also rises. A study by World Bank shows that countries that have a debt to gross domestic product ratio of more than 77 per cent for a longer period of time, are expected to go through slowdowns in the growth of their economy.

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