BY MBONO MDLULI
MBABANE – Minister of Finance Neal Rijkenberg is of the view that the country should always maintain its debt-to-GDP at below 45 percent.
Rijkenberg says this will help Eswatini to keep its debt stock under control, so that the country does not find itself in a precarious financial situation. Rijkenberg said this was the most conservative way in which Govenrment could control its debt.
He mentioned that other organisations, such as SADC, advised that countries should keep their debt-to-GDP below 60 percent. He said as a country, they would not want to go that route because of the volatility of the income the country got from the SACU, which was volatile. He said keeping the country’s debt at 45 percent could cushion the country even from the SACU’s volatility.
Rijkenberg also mentioned that the country was performing relatively well in the financial space. The factors that make the country perform well include SACU Stabilisation Fund, which served as a cushion against the volatility of this market. Another factor was the wage bill, which decreased from 42 percent to about 33 percent. The budget of the country had improved and there was what the minister termed as the fiscal prudence.
The country’s fiscal deficit decreased from 7.5 percent to two percent last year. The country’s GDP also improved by five percent last year, and this year, with some rebasing, improved by three percent. Next year, the GDP is projected to improve by 8.3 percent. Government wants economic growth to be at 12 percent at the end of this term.
However, there is a feeling among members of the public that the economic improvement stated by the government has not been felt by the people. This feeling was validated by renowned Economist Thembinkosi Dube, who stated that it was true that the people were yet to feel the impact of the economic growth reported to be realised by the government. Dube said this during the post budget seminar, which was held at the Central Bank of Eswatini (CBE) complex in Ezulwini.
Eswatini’s total public debt reached E35.5 billion, equivalent to 40.7% of its Gross Domestic Product (GDP), with external debt at E16.1 billion (18.5% of GDP) and domestic debt at E19.4 billion (22.2% of GDP).
Here’s a more detailed breakdown:
• Total Public Debt: E35.5 billion, representing 40.7% of GDP.
• Public External Debt: E16.1 billion, or 18.5% of GDP, reflecting a 1% increase due to ongoing project loan disbursements.
• Public Domestic Debt: E19.4 billion, or 22.2% of GDP, driven by an additional E600 million advance from the Central Bank.
• Debt Portfolio: A mix of Treasury Bills (E3.5 billion), government bonds (E12 billion), and loans.
• Short-term securities: Dominated by the Central Bank and commercial banks.
• Longer-term instruments: Held by non-bank financial institutions.
The debt-to-GDP ratio, which compares a country’s government debt to its gross domestic product, reveals a nation’s ability to repay its debt and is a key indicator of financial health.
Here’s a more detailed explanation:
• What it is:
The debt-to-GDP ratio is calculated by dividing a country’s total public debt by its GDP, and then multiplying by 100 to express it as a percentage.
• Why it matters:
A higher debt-to-GDP ratio suggests that a country may struggle to repay its debt, potentially leading to higher borrowing costs and a risk of default.
• Interpreting the ratio:
• Low ratio: Indicates that an economy produces enough goods and services to cover its debts without needing to borrow more.
• High ratio: Suggests that a country may have difficulty repaying its debts, potentially leading to economic instability.