By Ntombi Mhlongo
The decision by the Minister of Finance, Neal Rijkenberg to save about E1.5 billion from the SACU receipts will help the Central Bank of Eswatini (CBE) maintain a health healthy level of reserves.
This is an observation that was made by the Deputy Governor of the CBE Felicity Dlamini-Kunene during the presentation of the Annual Monetary Policy Statement for the financial year 2022/2023 on Monday.
She said the decision will also go a long way in protecting the Lilangeni peg. The Deputy Governor noted that in the sub-Saharan region, issues such as load-shedding and floods have slowed economic recovery. She said in neighbouring South Africa, the load shedding coupled with the sluggish growth prospects are among the factors that have contributed to a decline in investor confidence.
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As a result, she said the Rand continued to depreciate against the US dollar.
“The Lilangeni has depreciated in tandem given the peg to the Rand. This has made our imports originating from markets outside the Common Monetary Area (CMA) expensive, contributing to domestic inflationary pressures,” she said.
Elaborating, the Deputy Governor said while countries are on a monetary tightening cycle to curb inflation, it is obvious that monetary policy alone cannot effectively address the inflationary pressures. Therefore, she said, both fiscal and monetary policies must work hand in hand to address the persistent inflationary pressure and ensure sustainable economic growth.
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“The Central Bank remains committed to safeguarding price and financial stability and will pursue a policy stance that protects the peg,” she highlighted.
She said the CBE still believes that to enhance monetary policy effectiveness, clear and effective stakeholder communication is important which is why it has introduced a more interactive delivery of the monetary policy stance.
She emphasised that the CBE will continue to closely monitor global, regional, and domestic developments that affect Eswatini.