Tough times ahead for consumers with an increase in repo rate

By Phephile Motau

The South African Reserve Bank (SARB) has raised the repo rate and Eswatini is expected to follow suit.

The SARB on Thursday raised the repo rate by 25 basis points to 7.25%. SARB Governor Lesetja Kganyago said the statement reflected that inflation globally is high.

An economist previously told Eswatini Daily News that Eswatini would soon follow suit, as the country usually raises its repo rate a day after South Africa. He said this effectively means that the interest rate and prime rate would also increase, meaning people with inflation-based bank loans will find themselves paying more monthly payments.

He said Eswatini had no option but to raise the repo rate as inflation continued to increase. The economist added that the difference between Eswatini and South African repo rates did not need to be too much as the Rand and Lilangeni were pegged. He said if the repo rate was higher in South Africa, banks would decide to take their money to the neighbouring country.

Money Web reported that Kganyago said South Africa’s prospects for growth were more uncertain than normal, in part due to extensive load shedding, pushing the bank to lower its GDP growth projections for the year.

The Reserve Bank now forecasts a growth of 0.3% in 2023.

“The forecast incorporates an assumption of increased load shedding in each year compared to what was pencilled in at the time of the November meeting. A material reduction in load shedding would significantly raise growth. There could also be a higher investment in alternative energy sources as firms and households offset the impact of load-shedding,” he said.