By Phiwa Sikhondze
Business Eswatini (BE) has welcomed the Central Bank of Eswatini’s decision to reduce interest rates by 25 basis points to 7.25%, viewing it as a significant step towards alleviating the financial burden on local businesses.
This decision, made during the Central Bank’s recent Monetary Policy Consultative Meeting, reflects a trend of cooling consumer prices and favorable inflation projections.
In a statement following the announcement, BE expressed optimism about the potential impact of the rate cut.
“While the reduction is modest, it will go a long way in reducing the cost of capital for businesses that have been struggling under expensive debt,” BE noted.
BE emphasized the timing of the cut, which coincides with the upcoming Christmas shopping season, as particularly beneficial for boosting consumer spending and stimulating economic activity.
The organization highlighted the effectiveness of the Central Bank’s monetary policy interventions in managing inflation, especially after the significant economic disruptions caused by the COVID-19 pandemic.
The organization pointed out that the restoration of local and international supply chains has led to a surge in demand, which initially drove prices to unsustainable levels.
However, BE also urged for improved coordination between monetary policy and government fiscal policies, which they believe is essential for stabilizing prices and effectively managing inflation.
“The coordination between these two allied policies is crucial for creating a smoother path towards economic stability,” BE stated, calling for a more integrated approach to economic policy-making.
The organization also noted the 75 basis points variance in benchmark rates between Eswatini and South Africa, where the current rate stands at 8%. This disparity reinforces the independence of Eswatini’s monetary policy and BE commended the Central Bank for its proactive stance amid complex economic challenges.
Looking to the future, BE is hopeful for further interest rate reductions by the end of the year, contingent on stable inflation.
“A low-interest rate environment is key to supercharging our economy and achieving our growth aspirations as a country,” BE concluded.