Non-performing bank loans rise by 2.6%

By Sizwe Dlamini

The Central Bank of Eswatini has revealed that the quality of the banking sector’s loan book deteriorated with non-performing loans rising by 2.6 percent month-on-month and 7.4 percent over the year to reach E1.1 billion at the end of January 2024.

According to The Central Bank of Eswatini’s Economic Review and Inflation Report, March 2024,the ratio of non-performing loans to gross loans stood at 7.0 percent, which is 0.2 percentage points higher than the 6.8 percent recorded the previous month, and 0.1 percentage point lower than the 7.1 percent registered in January 2023.

The report notes that credit extended to the private sector decreased by 2.2% over the month and grew by 7.8% from the previous year to settle at E18.7 billion at the end of January 2024.

The month-on-month contraction in credit was driven by a decline in credit to other sectors of the economy namely, other financial corporations, parastatals, and local government and the business sector.

Also credit to the households & non-profit institutions serving households (NPISH) sector improved.

Year-on-year growth in private sector credit slowed down from 6.6% in December 2023 to 3.3% in January 2024 while credit extended to the household & NPISH sector improved by 0.2% month-on-month and 4.5% year-on-year to close at E8.5 billion at the end of January 2024.

The month-on-month improvement in credit to households was driven by other personal (unsecured) and motor vehicle loans whilst housing loans receded. Other personal (unsecured) loans grew by 2.5% to E3.2 billion.

Motor vehicle loans increased by 0.8% to reach E1.1 billion. In contrast, housing loans fell by 1.7%to E4.2 billion at the end of January 2024.

Meanwhile, credit extended to the business sector declined by 3.6% over the review month and grew by 9.3% year-on-year to close at E9.4 billion at the end of January 2024. 

The report further reveals that official foreign reserves have increased to E9.5 billion allowing an increase in the kingdom’s import cover.

The aforementioned increase is sufficient to provide cover for an estimated 2.8 months of imports of goods and services.

The recent improvement in reserves was largely due to an inflow of foreign currency from trades with the kingdom’s foreign trade partners leading to an inflow of foreign currency from trades with local commercial banks.

This comes despite gross official reserves declining by 8.1% month-on-month but growing by 13.2% year-on-year to close to E9.0 billion at the end of February 2024.

“During February the month-on-month fall in reserves was mainly due to net outflows of foreign currency from trades with local banks. At that previous level, the kingdom’s reserves were enough to cover an estimated 2.6 months of imports of goods and services, which is lower than the 2.9 months registered in January 2024. This indicates an overall recovery of half a billion in the kingdom’s official reserves from February to March 2024.”

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