Washington, DC – August 7, 2025: An International Monetary Fund (IMF) staff team, led by Ms. Xiangming Li, IMF mission chief for Eswatini, visited Mbabane from July 24 - August 6, 2025, to conduct discussions for the 2025 Article IV Consultation with the country’s authorities.
At the conclusion of the mission, Ms. Li made the following statement:
“Eswatini’s economic growth is expected to accelerate from 2.8 percent in 2024 to 4.3 percent in 2025 driven by large public and private investment projects. Risks to this outlook include heightened global uncertainty and potential delays in project execution. Growth is projected to gradually ease over the medium term to 2.8 percent, close to the long-term average. Inflation is expected to moderate to 3.5 percent in 2025 from 4.0 percent in 2024 and broadly track South Africa.
“The structural primary deficit, which excludes Southern African Customs Union (SACU) revenues, widened by 1.1 percent of GDP in FY24/25. This year, the structural primary deficit will be tightened by 1.8 percent of GDP, which is appropriate to rein in rising debt. However, because of a large decline in SACU revenue and higher interest payments, the overall deficit is projected to increase to 4.7 percent of GDP, compared with 2.3 percent of GDP in FY24/25. Public debt is projected at 42.9 percent owing in part to the regularization of arrears.
“Financing of the deficit 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 broadened the investor base by issuing 600 million rand in 5-year bonds at the Johannesburg Stock Exchange, at 12.175 percent, close to comparable bonds issued in Eswatini. The government has increased borrowing from International Financial Institutions (IFIs) to help lower interest expenses and clear arrears.
“Over the next six years, the government appropriately plans to reduce the structural primary deficit by 1.9 percent of GDP, stabilizing the public debt-to-GDP ratio at 42.8 percent by mid-2031. The consolidation depends critically on containing spending on goods and services, grants, and the wage bill. The containment, in turn, requires strong reforms.
“The expeditious implementation of the ongoing public financial management (PFM) reforms will be essential to enhance budget control and improve efficiency. Priorities include implementing the Integrated Financial Management Information System to improve budget planning and control and amending the PFM Act to improve public investment management and to support reforms of public enterprises. In parallel, the government is working to improve the efficiency of public service delivery through the e-Government initiative, ‘Government In Your Hand,’ and to rationalize the civil service to create fiscal space for priority spending.
“The external position weakened slightly in 2024, with foreign reserves remaining below adequacy thresholds. The external current account surplus narrowed to an estimated 1.3 percent of GDP. It is projected to shift into a deficit in 2025 as SACU revenues decline and imports continue to rise as large-scale investment projects are implemented. IFI disbursements are expected to temporarily boost reserves in 2025.
“On August 1, the Central Bank of Eswatini kept its policy rate at 6.75 percent, highlighting its consideration for the credibility of the peg and foreign reserves adequacy. This effectively narrowed the policy rate differential with South Africa to 25 basis points, following the policy rate reduction there on July 31. Given Eswatini’s relatively low reserves, eliminating the differential would help safeguard the peg. This alignment would also effectively harmonize the policy rate with the overnight call window rate, improving the clarity and effectiveness of the monetary policy framework. Limiting cash advances to the government to only exceptional circumstances will help stem capital outflows and support the peg.
“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.
“The government’s efforts to raise potential growth would benefit from a stronger focus on actions that can foster private sector development. Priorities include closing infrastructure gaps, streamlining regulations, reforming SOEs, expanding credit access, and strengthening governance. Addressing skill mismatches through improved technical and vocational training, alongside broader education reforms, is vital to reducing unemployment and inequality.
“The mission thanks the authorities for their excellent cooperation and warm hospitality.”
