CBE TO DISCUSS MONETARY POLICY INFLUENCES

Mbabane - The Central Bank of Eswatini (CBE) will on Friday discuss the factors that have influenced monetary policy decisions throughout the past year.

This was mentioned by CBE Governor Majozi Sithole yesterday. Sithole said he will be hosting CBE’s annual webinar to discuss what has influenced monetary policy decisions throughout the past year and give a brief outlook on what could influence price and financial stability in the country. The governor said a meeting with the Monetary Policy Consultative Committee (MPCC) to consider the appropriate monetary policy stance on Friday led to CBE deciding to increase the interest rate by 50 bases point.

Decision

He said there were a lot of factors to consider when making this decision, which included the ongoing Russia-Ukraine war, which was weighing heavily on the economy. Sithole also said the uncertainty of COVID-19 and the continuous change in monetary policies from advance economies continue to affect the economy of the country. “The world economy continued to face challenges that still demonstrate the lingering uncertainty about the COVID-19 pandemic, the ongoing Russia-Ukraine war and faster normalisations of monetary policies in advancd economies,” he said. Sithole also mentioned that the International Monetary Fund (IMF) highlighted that the negative economic impact of the Russian-Ukraine war would contribute to a significant slowdown in global growth in the current year. This means that should the war persist, the CBE will adapt to new monetary policy decision to make sure the economy is kept stable.

Disruptions

The governor will also discuss global chain supply disruptions. He mentioned that global supply chain disruptions, rising energy and other commodity prices continue to weigh heavily on global economic outlook. He said economic activity as measured by the quarterly gross domestic product (GDP) is estimated to have increased by a slower 2.1 per cent on a year-on-year and seasonally adjusted basis in the fourth quarter of 2021, from a revised growth of 3.9 per cent in the third quarter of 2021. “The slowdown in economic activity was largely attributed to poor performance in the tertiary sector and moderate increases in the primary and secondary sectors,” he said. Sithole further mentioned that credit extended to the private sector contracted and this was led by the fall in credit emanating from credit to other sectors of the domestic economy, which include other financial corporations, parastatals and the government.

Sector

He said credit extended to the private sector increased while credit extended to the household and Non-Profit Institutions Serving Households (NPISH) sector recorded a marginal increase. Part of the governor’s discussions will be CBE’s shift from an expansionary monetary policy to a contractionary monetary policy. Contractionary policy is a monetary measure referring either to a reduction in government spending, particularly deficit spending, or a reduction in the rate of monetary expansion by a central bank. Distortions include high inflation from an expanding money supply, unreasonable asset prices, or crowding-out effects, where a spike in interest rates leads to a reduction in private investment spending such that it dampens the initial increase of total investment spending.

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