IMF Staff Completes 2026 Article IV Mission to the Kingdom of Eswatini
IMF News, August 5, 2026
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- Published: August 5, 2026
Economic performance and outlook
- Real GDP growth accelerated to 4.9 percent in 2025, supported by large public and private investment projects.
- Growth is expected to moderate in 2026 due to:
- higher fuel costs,
- weaker global demand,
- tighter financing conditions,
- weather-related disruptions,
- easing of investment activity.
- Unemployment remains high at 33.5 percent.
- Inflation trajectory:
- Inflation moderated in 2025 and declined through early 2026 before rising modestly to 2.6 percent in June 2026.
- Higher fuel prices are projected to raise average inflation for the year.
External sector and reserves
- Current account:
- Current account surplus widened from 2.1 percent of GDP in 2024 to 2.4 percent in 2025, driven largely by an improvement in the primary income balance.
- The current account surplus is expected to narrow, reflecting higher fuel costs and strong investment-related imports.
- Reserves and external buffers:
- Gross international reserves remained low at 2.5 months of imports at end-2025.
- Reserve coverage is projected to edge down, weakening external buffers over the medium term.
Fiscal developments and public debt
- Fiscal deficits and debt levels:
- The fiscal deficit rose sharply in FY25/26 to 6.1 percent of GDP from 1.1 percent the previous year, largely reflecting public wage increases and higher public investment.
- As a result, public debt rose from 40 percent of GDP at end-FY24/25 to 44.7 percent of GDP at end-FY25/26.
- The page also notes public debt rose to 45 percent of GDP by end-FY25/26 and is expected to increase to 50 percent by end-FY26/27, driven by public investment and wage increases.
- The FY26/27 budgeted deficit narrows slightly to 5.9 percent of GDP, as higher public wages and interest payments offset declines in other spending and higher SACU revenues.
- Public debt is expected to reach 50 percent of GDP by end-FY26/27.
- Medium-term framework and projections:
- The Medium-Term Fiscal Framework approved by Cabinet envisages fiscal consolidation over the medium term with a cumulative reduction of 6.2 percentage points of GDP in the structural primary balance (excluding SACU revenue) through FY31/32.
- Public debt is projected to peak at over 52 percent of GDP before declining to about 45 percent by end-FY31/32.
- The government has been expanding use of concessional external financing, helping lower borrowing costs.
- Fiscal policy recommendations:
- Further rationalization of recurrent spending, particularly transfers and other expenses over FY26/27-FY28/29, is advisable to accelerate debt reduction, strengthen fiscal buffers, and create space for growth-enhancing capital spending.
- Strengthen public financial management: fully implement and enforce the 2017 Public Financial Management Act and advance targeted amendments to strengthen public debt and public investment management.
- Accelerate rollout of the Integrated Financial Management Information System and e-procurement, and strengthen budget execution and financial controls.
- Rationalize public sector employment and strengthen financial discipline of public enterprises to contain fiscal pressures while safeguarding service delivery.
Monetary policy and financial sector
- Policy settings and indicators:
- The Central Bank of Eswatini (CBE) has maintained its policy rate at 6.75 percent since May 2025.
- This leaves it 25 basis points below the South African Reserve Bank’s (SARB) policy rate, while the CBE has kept its overnight deposit rate for banks aligned with the South African money market rate.
- Private sector credit growth remained robust at 10.6 percent year-on-year at end-May 2026.
- The banking system remains liquid and well-capitalized, though financial performance remains uneven across banks.
- Recommendations for monetary framework and oversight:
- CBE should closely monitor developments, carefully calibrate its policy rate alignment with the SARB, and stand ready to take measures as needed to safeguard the exchange rate peg.
- Strengthen the monetary policy framework by refining policy instruments, enhancing liquidity forecasting, and further developing money markets to improve policy transmission.
- Strengthen financial sector oversight: update the legal and regulatory framework (notably the Central Bank of Eswatini Act and the Financial Services Regulatory Authority Act), and operationalize the deposit insurance scheme and emergency liquidity assistance framework.
Structural reforms and digitalization
- Structural reforms remain essential to support economic diversification and job creation.
- Key priorities:
- Reduce regulatory hurdles and accelerate digitalization, including the responsible use of artificial intelligence, to boost productivity, improve public service delivery, and create new growth opportunities.
- Continue building digital skills and modernizing regulatory frameworks to unlock the full benefits of digitalization.
- Public financial management reforms (see Fiscal section) are critical to support fiscal consolidation.
Risks and scenarios
- Major downside risks identified:
- A prolonged conflict in the Middle East could further increase fuel and fertilizer prices, weaken external demand, and heighten fiscal pressures.
- Climate-related shocks, particularly drought and erratic rainfall patterns, could disrupt agricultural production, raise food prices, and worsen poverty.
- Under a severe global shock scenario:
- Growth would be weaker,
- inflation would be higher,
- public debt would rise more rapidly,
- underscoring the need for continued fiscal adjustment and structural reforms to build resilience.
Mission details and closing remarks
- Mission timing and leadership:
- An IMF team led by Ms. Xiangming Li visited Mbabane during July 23 – August 5, 2026, for the 2026 Article IV Consultation.
- Closing statement highlights:
- The mission thanked the authorities for their excellent collaboration and warm hospitality.
IMF Staff Completes 2026 Article IV Mission to the Kingdom of Eswatini. August 5, 2026. International Monetary Fund.