BY PHUMELELE GAMEDZE
MBABANE– Eswatini’s annual inflation eased to 2.5 per cent in July, offering some breathing space to households and businesses, but rising fuel and transport costs could put fresh pressure on prices, Nedbank Treasury Sales Manager Sifiso Nsibande said today.
Speaking on Nedbank Eswatini’s Business Watch programme today, Nsibande said the lower than expected inflation figure could give the Central Bank of Eswatini (CBE) room to keep interest rates unchanged while monitoring developments in the local, regional and global economies.
“We actually saw inflation at 2.5 per cent in July, which is lower than expectations. That gives them room to keep rates on hold as well,” Nsibande said.
The July inflation figure comes as households continue to navigate the cost of transport, food and other essential goods, making movements in prices an important part of everyday family budgeting.
Eswatini has maintained its interest rates during the past two cycles, following similar decisions in South Africa, whose monetary policy developments have a strong influence on the local economy.
Nsibande explained that a significant change in South African interest rates could affect the CBE’s future decisions.
“If interest rates go up in South Africa, the disparity between their rates and ours will increase. So maybe our central bank, wanting to close that gap, might consider a 25 basis point hike,” he said.
Beyond interest rates, Nsibande said movements in the US dollar and international financial markets were also creating different opportunities and challenges for local businesses.
A weaker dollar, he explained, could benefit importers by making it easier for businesses to plan purchases of machinery, raw materials and other production inputs.
“But it’s good news for importers; they’re excited. They can now make decisions on exchange contracts to purchase supplies they need for production,” Nsibande said.
Exporters, however, may experience currency movements differently because changes in exchange rates can affect the value of their foreign earnings when converted into local currency.
Meanwhile, international oil prices remain a concern for consumers and businesses.
Nsibande said geopolitical tensions and uncertainty around the Strait of Hormuz could continue influencing global oil prices, with possible consequences for the cost of living in Eswatini.
“The consumer is definitely going to continue to be affected,” he said.
As a fuel importing economy, Eswatini remains exposed to international oil price movements. When fuel becomes more expensive, transport operators face higher operating costs, which can eventually affect the prices consumers pay for goods and services.
Nsibande also pointed to reports that public transport operators were seeking fare increases of up to 25 per cent, warning that such increases could add to inflationary pressure.
“We’ve seen headlines recently that even public transport operators want to hike their prices by as much as 25%. Even commodities, everything seems to be going up,” he said.
He explained that sustained increases in transport and commodity prices could push inflation higher and potentially influence future interest-rate decisions.
“Once everything goes up, inflation goes up. And once inflation rises, the central bank may begin to think about hiking interest rates which makes it even worse,” Nsibande said.
For ordinary emaSwati, higher interest rates could mean more expensive loans, while businesses could face increased borrowing costs that may affect investment and expansion.
Nsibande described the situation as “a vicious cycle”, illustrating how international developments can eventually reach household budgets through fuel, transport, food and borrowing costs.
Despite these concerns, the 2.5 per cent inflation rate remains a positive signal for the economy, giving households and businesses some room to plan while policymakers monitor developments in South Africa, global currencies and oil markets.
The key question for consumers, however, is whether the current inflation relief can be sustained if fuel, transport and commodity prices continue rising.
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(Courtesy Pic)
