The central bank of Eswatini has cut its main lending rate by 50 basis points to 4 percent. This latest move is in response to the impact of COVID-19 (coronavirus) on its economy in recent months. It also aligns with that of its neighbour, South Africa, which also cut its main lending rate by 50 basis points on Thursday, May 21, 2020.
In a statement on Friday, May 22, 2020, the bank mentioned the impact of the pandemic on its growth, forecasting an expected shrink by 6.16 percent in 2020 under a pessimistic scenario.
Earlier, in mid-March, the country’s central bank took a similar step by cutting its main lending rate by 100 basis points to 5.5 percent, citing global 1and domestic economic developments, including the impact of coronavirus. However, it stated that then the reduction was to ensure the equal pegging of the local currency with the South African rand after the South African Reserve Bank (SARB) cut its main lending rate by 100 basis points to 5.25 percent.
In addition to the impact of coronavirus on the economy, there are several challenges that hamper economic growth in the Southern African country. In 2019, the government identified large fiscal deficit, stagnating economic growth, and a poor business environment as the three major challenges facing the economy.
According to the 2020 Index of Economic Freedom, Eswatini’s economic freedom scores 55.3, ranking its economy as the 131st freest business economy in the world. But its overall score has increased by 0.6 point as a result of a great score for property rights. Furthermore, the report shows that the economy has been scored moderately free only twice in the past decade, and it remained in the mostly unfree category in 2020 for the third year in a row. It also cited that GDP growth remains lower than optimal as well.
Eswatini is a landlocked Southern African country ruled by absolute monarchy and a Prime Minister with constitutional provisions and Swazi law and Custom. The current Head of State is King Mswati III while its Prime Minister is Ambrose Mandvulo Dlamini