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CBE’S CREDIT TO PRIVATE SECTOR UP 1.5%

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MBABANE – The Central Bank of Eswatini (CBE) has announced that the credit extended to the private sector has increased this month.

Credit to private sector by central banks refers to financial resources provided to the private sector by other depository corporations, such as through loans, purchases of non-equity securities, trade credits and other accounts receivable. CBE said the credit extended increased by 1.5 per cent month-on-month and 4.8 per cent year-on-year to E16.1 billion at the end of April 2022. This was mentioned by the central bank in the monthly statistical release. CBE mentions in the statement that the rise in credit to the private sector was credit to businesses and households & non-profit institutions serving households (NPISH), whilst credit to other sectors decreased.

They said the credit extended to businesses stood at E7.5 billion at the end of April 2022, reflecting an increase of 5.4 per cent over the month and 20.2 per cent relative to the previous year. “Contributing to the growth in credit to businesses were all its subsectors, namely: agriculture & forestry (17.7 per cent), manufacturing (8.9 per cent), community social and personal services (4.2 per cent), real estate (4.1 per cent), construction (3.5 per cent), transport & communications (1.1 per cent), distribution & tourism (0.8 per cent) as well as mining & quarrying (0.2 per cent),” mentions CBE. CBE said they raised the discount rate by 50 basis points to 4.5 per cent in May 2022.

They mentioned that broad money supply amounted to E19.9 billion at the end of April 2022, reflecting an expansion of 3.0 per cent month-on-month and a decline of 5.2 per cent year-on-year. “Domestic liquid assets grew by 4.8 per cent from March 2022 and decreased by 10.7 per cent over the year to close at E7.7 billion at the end of April 2022,’’ mentions CBE in the statement. The central bank also attested that commercial banks also raised their prime lending rate by 50 basis points to 8.0 per cent in May 2022 which also resulted to them raising the discount rate by 50 basis points to 4.5 per cent in May 2022.

CBE added that Gross official reserves increased by 5.2 per cent between April and May 2022 and by 29.1 per cent year-on-year to close at E9.2 billion at the end of May 2022. They said the growth in reserves was mainly boosted by the inflow of loans from World Bank and African Development Bank for government budget support over the review month. “Consequently, the import cover improved slightly from 3.3 month in April 2022 to 3.4 months at the end of May 2022,” they added. CBE also mentioned that value in special drawing rights (SDR), gross official reserves stood at SDR433.7 million at the end of May 2022, higher by 6.1 per cent month-on-month and 21.5 per cent over the year.

They raised the discount rate to 50 basis points from four per cent to 4.5 per cent. An increase in interest rates means that the cost of borrowing is rising. This means that people will pay more for debts, leaving them with less money to spend on goods and services.  This also reduces consumer spending, which then causes business revenues to drop. This has in the past led to businesses refraining from borrowing money for investment and growth, resulting in a fall in sales, especially companies supplying machinery or buildings for businesses. CBE Governor Majozi Sithole said they held a meeting with the Monetary Policy Consultative Committee (MPCC) to consider the appropriate monetary policy stance last month.

Sithole in the monetary policy statement said they then decided to increase the interest rate by 0.5 per cent after taking into consideration relevant, global and economic developments.
“We took into account economic development; as well as the price and financial stability mandate, the bank then decided to raise the discount rate by 50 basis points from four per  cent to 4.5 per cent,” he said. Sithole also mentioned that the world economy continued to face challenges that still demonstrate the lingering uncertainty about the COVID-19 pandemic, the on-going Russia-Ukraine war and faster normalisations of monetary policies in advance economies. “The International Monetary Fund (IMF) highlights that the negative economic impact of the Russian-Ukraine war will contribute to a significant slowdown in global growth in 2022,” he said. The Governor mentioned that global supply chain disruptions, rising energy and other commodity prices will continue to weigh heavily on global economic outlook.

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