By Lwazi Dlamini
“In a year broadly marked with triumphs, the insights contained herein reflect a nuanced understanding of the dynamics that have shaped Eswatini’s financial landscape between June 2023 and June 2024,”
This was the opening remarks by the Central Bank of Eswatini Governor, Dr. Phil Mnisi as he presented the financial stability review for the year ended, June 2024 on Tuesday.
Mnisi said the 2024 issue marks the 8th annual publication since 2017 which is a testament to the CBE’s unwavering commitment to maintaining and enhancing the robustness of Eswatini’s financial system.
“The past review year was characterized by relative economic relief, influenced by global and domestic factors that have eased the strain on domestic financial institutions.
The post-pandemic era has been a testament to the collective efforts of domestic financial entities, regulators and policymakers to safeguard the resilience and robustness of the financial system,” Mnisi said.
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Mnisi added: “In the preceding assessment, the FSR brought out concerns over the constraints experienced by the household sector, sluggish economic growth and a weakening of bank assets.
However, the period under review reflects a positive turnaround, with a notable improvement in the Banks’ asset quality.
An easing of household balance sheets has also been observed, evidenced by an increase in disposable income, subdued inflation rates and the CBE’s firm policy stance on interest rates in the review period.”
He said that in the past year, the global financial landscape has become more accommodating, attributed to several factors.
Notably, a downturn in energy prices has led to decreased overall inflation, sparking optimism about potential monetary policies easing.
“This optimism has led to expectations of lower interest rates, resulting in a decline in global long-term interest rates and a boost in financial markets across both advanced and emerging economies.
Additionally, the easing of financial conditions has been supported by the loosening of US monetary policy, which reached its most relaxed level since February 2022, contributing to lower borrowing costs and increased economic activity.
This favourable scenario has laid the groundwork for mitigating risks to the domestic financial system, thereby supporting its ongoing resilience,” Mnisi said.
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He said in June 2024, the Financial Stability Index reflected an upward trend, rising to 0.50 index points from 0.02 index points in June 2023 and this positive trajectory was underpinned by enhanced bank asset quality, robust private sector credit growth, and an increase in the value of Gross Official Reserves.
“Further, the banking sector’s capital adequacy ratio remains strong, even as we navigate profitability challenges.
In the household sector, declining indebtedness and rising disposable income signal reduced financial stress.
When households reduce their debt levels and their disposable income rises, they experience less financial pressure, which is a positive indicator of economic well-being, which, in turn,
contributes to broader financial stability by reducing the risks of defaults and financial disruptions in the household sector. However, risks associated with unsecured lending remain a concern,” he noted.
