The country’s gross reserves have fallen by 18.8% over the year and currently stand at E7.4 Billion, which is lower than the recommended benchmark of 3 months of import cover.
By Avite Mbabzi
Eswatini has experienced a notable decrease in gross national reserves since October 2021. According to the July-August 2022 monthly statistical release by the Central Bank of Eswatini (CBE), the country’s Gross Official Reserves have fallen by 18.8 % over the year and stood at E7.1 Billion at the end of August. However, as of 16 September 2022, they stand at E7.4 Billion.
Reserves play a crucial role in a country’s defense against economic shocks. Countries with adequate reserves are generally able to avoid drops in output and consumption in times of crisis.
During this year’s budget speech the Minister of Finance Neal Rijkenberg remarked that the country’s reserves stood at E9.7 Billion as of October 2021. “The 2021 domestic buffers were equivalent to 3.8 months of import cover, surpassing the internationally recommended three-month import cover threshold”
On the contrary, current CBE foreign reserves are reportedly only able to cover 2.7 months’ worth of imports of goods and services. The CBE is concerned about the current levels of reserves as noted in the Monetary Policy Statement released on 23 September 2022.” The Bank is highly concerned by the observed deterioration of the country’s reserves position. At this level, the reserves are lower than the recommended benchmark of 3 months of import cover” notes the CBE.
The ultimate goal, however, is not to infinitely accumulate foreign reserves when strengthening economic buffers, notes the International Monetary Fund (IMF), as there are costs to consider including the cost of physical investment foregone.
According to an IMF Survey titled Assessing the Need for Foreign Currency Reserves published on 14 February 2011, reserve adequacy should be judged against the potential for outflow pressures from multiple sources.
Business Insider Africa revealed that South Africa has the largest foreign currency reserves in Africa at over E1 Trillion.
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