Africa-Press – Eswatini. There has been a significant improvement in the quality of the banking sector’s loan book in September, as non-performing loans (NPL) declined by 8.8 per cent.
NPLs have been on a stubborn increase over the year, which was previously CBE to be a concern to the Central Bank of Eswatini.
According to the monetary policy statement issued the Central Bank of Eswatini (CBE) Governor Dr. Phil Mnisi last week, NPLs were making an improvement.
It indicated that in a positive twist to the previous months reports, NPLs declined to stand at E1.1 billion at the end of September.
The decrease is reported to have driven the 0.6 percentage points fall of NPL ratio over the month to record 7.4 per cent at the end of September.
Economist Thembinkhosi Dube says this can be accredited to the CBE’s decision to maintain interest rates at 7.5 per cent.
“The decline in non-performing loans can be attributed to a variety of factors, which include the readjustment of salaries, as well as the Cost of Living adjustment (CoLA),” said Dube.
He further highlighted that following the decrease in interest rates earlier in the year, it has been quite ample time for people to readjust their expenses.
“People take some time to readjust, there is always a time lag between the changes in rates and the rate at which people can adjust,” said Dube, explaining why the NPL ratio was alarming since the first decrease earlier in the year.
Ratio
The economist that the ratio of non-performing loans could possible continue with the downward trend in the event that interest rates remained unchanged and as people continued to readjust.
“It is not to say that people can now afford to pay back their loans, but to say that people have worked hard towards readjusting, and more time will only give them more opportunity to adjust further,” he said.
The economist highlighted that NPLs would return back to its stubborn upward trend should interest rates increase from the rate that people had now adjusted to.
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