IMF Staff Completes 2025 Article IV Mission to The Kingdom of Eswatini

IMF News, August 7, 2025

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Canonical URL: IMF Staff Completes 2025 Article IV Mission to The Kingdom of Eswatini

IMF staff team, led by Ms. Xiangming Li, visited Mbabane from July 24 - August 6, 2025 to conduct discussions for the 2025 Article IV Consultation.
End-of-Mission press release conveys preliminary findings of the mission; staff will prepare a report for the IMF’s Executive Board subject to management approval.

Growth:
- 2.8 percent in 2024.
- Expected to accelerate to 4.3 percent in 2025 driven by large public and private investment projects.
- Projected to gradually ease over the medium term to 2.8 percent, close to the long-term average.
Inflation:
- 4.0 percent in 2024.
- Expected to moderate to 3.5 percent in 2025 and broadly track South Africa.
Risks:
- Heightened global uncertainty.
- Potential delays in project execution.

FY24/25:
- Fiscal deficit widened to 2.3 percent of GDP despite higher SACU revenues.
- Structural primary deficit (excluding SACU revenues) widened by 1.1 percent of GDP in FY24/25.
2025 outlook and financing:
- Structural primary deficit will be tightened by 1.8 percent of GDP in the current year.
- Overall deficit is projected to increase to 4.7 percent of GDP, compared with 2.3 percent of GDP in FY24/25, because of a large decline in SACU revenue and higher interest payments.
- Public debt is projected at 42.9 percent owing in part to the regularization of arrears.
- Financing has been relatively expensive, with the spread on government securities reaching as high as 3¾ percentage points above comparable South African instruments.
- In July 2025, Eswatini issued 600 million rand in 5-year bonds at the Johannesburg Stock Exchange, at 12.175 percent.
- Government increased borrowing from International Financial Institutions (IFIs) to help lower interest expenses and clear arrears.
Medium-term consolidation:
- Over the next six years, the government plans to reduce the structural primary deficit by 1.9 percent of GDP.
- Public debt-to-GDP ratio projected to stabilize at 42.8 percent by mid-2031.
- Consolidation depends critically on containing spending on goods and services, grants, and the wage bill, which requires strong reforms.

External current account:
- External current account surplus narrowed to an estimated 1.3 percent of GDP in 2024.
- Projected to shift into a deficit in 2025 as SACU revenues decline and imports rise with large-scale investment projects.
Reserves:
- Foreign reserves remained below adequacy thresholds in 2024.
- IFI disbursements expected to temporarily boost reserves in 2025.

Policy rate and peg:
- On August 1, the Central Bank of Eswatini kept its policy rate at 6.75 percent.
- This effectively narrowed the policy rate differential with South Africa to 25 basis points following the policy rate reduction there on July 31.
- Given relatively low reserves, eliminating the differential would help safeguard the peg and harmonize the policy rate with the overnight call window rate.
- Limiting cash advances to the government to only exceptional circumstances will help stem capital outflows and support the peg.
Financial sector buffers and safeguards:
- Buffers in the financial system are adequate, but close monitoring of asset quality should continue.
- Passage of key legislation, such as the updated Financial Services Regulatory Authority Act, and finalizing regulations for non-bank financial institutions are essential for safeguarding financial stability.
- Operationalizing the deposit insurance scheme and the Emergency Liquidity Assistance facility will further reinforce the financial safety net.

Public financial management (PFM):
- Expeditious implementation of ongoing PFM reforms is essential to enhance budget control and improve efficiency.
- Priorities include:
- Implementing the Integrated Financial Management Information System to improve budget planning and control.
- Amending the PFM Act to improve public investment management and to support reforms of public enterprises.
Public service delivery and civil service:
- Complete the e-Government initiative, “Government In Your Hand,” to improve efficiency of public service delivery.
- Rationalize the civil service to create fiscal space for priority spending.
Private sector development and human capital:
- Priorities to raise potential growth:
- Close infrastructure gaps.
- Streamline regulations.
- Reform SOEs.
- Expand credit access.
- Strengthen governance.
- Address skill mismatches through improved technical and vocational training, alongside broader education reforms, to reduce unemployment and inequality.

The mission thanked the authorities for their cooperation and hospitality.
Statement of IMF staff views: views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

IMF Staff Completes 2025 Article IV Mission to The Kingdom of Eswatini, August 6, 2025.