Africa-Press – Eswatini. Experts broadly welcome the Central Bank of Eswatini’s (CBE) decision to keep interest rates on pause and expect rate cuts to start in the second half of the year.
On Friday, CBE Governor Dr Phil Mnisi announced that the central bank would be keeping the repo rate stable for the fourth meeting in a row. The interest rate was kept unchanged at 7.5 per cent and banks are therefore expected to maintain the prime lending rate to loans extended to individuals and businesses at 11.0 per cent, until the next monetary policy meeting.
This decision is in line with most experts’ expectations, as they expect the CBE to keep rates stable in the first half of the year, and only consider rate cuts in the second half of the year.
In an interview yesterday, Economist Mduduzi Mthembu said it was expected, given that inflation had been relatively stable within the three-six per cent band, as per the monetary policy stance.
Mthembu said it was a relief not to have another interest rate hike to the already overstretched consumer. He said a number of examples could be put forward, as to why households were already overstretched. For instance, the problem of youth unemployment meant that school leavers and university graduates remained a burden to their parents, who are still servicing mortgages, car loans and the study fees for the unemployed youth in most cases. Mthembu said increasing interest rates would be directly increasing that burden on households.
On business, it means that funding rates for working capital also remains where it was before. An increase on business costs still filters through to the households in terms of higher prices.
In a interview on January 14, Economist Sanele Sibiya said they were expecting the interest rate to start declining, probably from the second half of 2024. “What we expect in the short medium-term, is that it will stay right where it is now, while we keep an eye on other global signals,” said the economist.
Sibiya said the CBE could not rush into dropping the interest rate while signals across the globe had not yet shown any clear signs of either going up or down. He said they were looking to the US Federal Reserve to start discussing their interest rate. He said it was expected that at least around February or March, the US Fed would start discussions. The economist stated that the country was likely to be affected by the ongoing conflicts in the Middle East and the Durban Port issues. He said the Durban Port issues were likely to affect the country’s food prices, as it was affecting issues of transportation. He said, as economists, they were hoping that all these global challenges would improve, so that the shocks may not be severe.
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