Govt defends 40% debt-to-GDP cap, cites risks of unsustainable borrowing
By Kwanele Dhladhla
Minister of Finance Neal Rijkenberg has explained the rationale behind Eswatini’s decision to fix its debt-to-Gross Domestic Product (GDP) ratio at 40 percent, stressing that the country must safeguard itself against debt distress and protect fiscal flexibility.
Rijkenberg was responding in Parliament to a motion moved by Ngudzeni Member of Parliament Charles Ndlovu, seconded by another legislator, calling on the government to outline strategies to enhance Eswatini’s Infrastructure Development Index.
In his response, the minister made it clear that while other countries operate at higher debt levels, Eswatini cannot afford to follow the same path.
“Whenever a country contracts some debt, it should be a debt that will grow the economy. The rate at which debt is growing should match the rate at which the economy is growing.
In our case, there is a disparity. Our debt growth rate is higher than our economic growth rate. This could result in the government failing to service its obligations, making debt a burden.
That is why we chose to maintain the debt-to-GDP ratio at 40 per cent,” Rijkenberg said.
The minister noted that the International Monetary Fund (IMF), in its July 2025 mission report, had warned that Eswatini’s debt was already on an unsustainable path.
The IMF recommended that the country maintain its debt threshold at around 42.9 per cent, cautioning against further borrowing.
“This was an important signal,” Rijkenberg said. “It showed that we have no more room to increase our debt levels without risking default. The focus now must be on promoting economic growth to increase GDP, which in turn will reduce the debt ratio.”
Rijkenberg outlined several reasons for capping the ratio at 40 per cent.
He explained that many of Eswatini’s projects have low or even negative internal rates of return (IRR). With high borrowing costs, the country ends up paying more in interest than it earns in economic benefits.
“This means debt servicing becomes a burden,” he said.
High debt levels, he argued, raise the risk of economic instability. They can spark debt crises, inflation, or even recession.
“Countries with high debt are seen as risky, which raises borrowing costs further because lenders demand a risk premium,” he noted.
The minister said keeping debt low gives the government the flexibility to respond to crises.
“Countries with high debt levels have very little room to manoeuvre when shocks occur, such as commodity price swings or rising global interest rates. With lower debt levels, Eswatini can still act decisively in times of crisis,” Rijkenberg explained.
Low debt servicing costs, he said, allow the government to channel more resources into education, healthcare, and infrastructure.
“This is crucial for our long-term development. Instead of paying high interest, we can use those funds to build the capacity of our people and economy,” he said.
Rijkenberg acknowledged that the debt-to-GDP ratio of 40 percent was far lower than the global and continental averages. The top 10 global economies have an average debt-to-GDP ratio of around 110 percent, while Africa’s top 10 economies average about 62 percent.
However, he pointed out that advanced economies like the United States, the United Kingdom, Japan, and China have access to deep capital markets.
They also benefit from robust economic growth, strong fiscal and monetary systems, high revenues, and fiscal discipline, enabling them to sustain much higher debt levels.
“These countries can service their obligations despite high borrowing. For emerging economies like Eswatini, the situation is very different. We do not have the same depth of capital markets or economic expansion rates,” he stressed.
On African peers, Rijkenberg said countries like Kenya, Nigeria, Ghana, and South Africa operate at higher debt levels but face severe challenges.
Ghana has already defaulted, Nigeria is battling debt distress, and Kenya is grappling with mounting repayment challenges.
“These examples show the dangers of exceeding sustainable debt levels. Eswatini cannot afford to follow the same path. By capping our debt ratio at 40 percent, we reduce the risk of default and strengthen our credit rating,” the minister explained.
The finance minister added that the Ministry of Finance, in collaboration with the Ministry of Economic Planning and Development, was implementing strategies to improve the Infrastructure Development Index.
He emphasised that future borrowing would only be considered for projects with strong economic returns.
“We must ensure that debt is used productively. Our strategy is not to avoid borrowing altogether but to ensure that every cent borrowed contributes meaningfully to economic growth.
By keeping our debt ratio at 40 percent, we protect Eswatini’s stability while building room for sustainable development,” Rijkenberg concluded.
