Mbabane: Even though government has pledged to inject E400 million to replenish the Central Bank of Swaziland’s (CBS) reserves, Governor Martin Dlamini is worried about dwindling balances which threaten the reserve position. For Swaziland, the preservation of the parity between the lilangeni and rand remains top priority, the governor admitted.
Nevertheless, he welcomed government’s E400 million recapitalisation expected to augment the level of reserves to be closer to the critical three-month level of import cover.
Speaking at the Happy Valley Hotel yesterday, where he presented his annual monetary policy statement, Dlamini highlighted that the reserves continued to decline to levels below internationally accepted standards because of dwindling Southern African Customs Union (SACU) receipts and payments of government’s budgetary obligations.
To address this issue, the Monetary Policy Consultative Committee (MPCC) recommended that government be discouraged from depleting the reserves to finance its expenditures, but instead be encouraged to adhere to the International Monetary Fund (IMF)’s Staff Monitored Programme (SMP) targets in order to secure external funding.
The governor suggested that government should swiftly implement planned expenditure control measures and other policy interventions including the Fiscal Adjustment Roadmap (FAR) in order for the reserves to revert to a sustained healthy position. He said implementation of these measures would further assist the country to access external financing from international financial institutions and cooperating partners.
Banking sector stable despite ailing economy
Swaziland's economy may be on its all time low, but the country’s banking sector remains relatively sound and stable. Last year, banks decided to adopt a more liberal approach as they increased loans and advances by 29.3%.
“It gives me great pleasure to report that the country’s banking institutions maintained capital adequacy ratios above the minimum statutory requirement of 8.0%. Furthermore, banking sector assets grew by 10.6% from E10.7 billion in December 2010 to E11.9 billion at the end of December 2011,” said Central Bank of Swaziland Governor Martin Dlamini.
Though the banking sector remained relatively sound and stable, Dlamini registered his concern with significant emerging vulnerabilities. He said such vulnerabilities include the under-regulation of non-bank financial institutions, which pose risks to the nation’s financial sector. He acknowledged that such risks called for comprehensive financial sector supervision to ensure stability going forward.
He was optimistic that the Financial Services Regulatory Authority (FSRA) which would supervise the activities of non-bank financial institutions including capital markets, insurance companies, pension funds and cooperatives would provide an environment for stable and balanced growth in the sector and reduce risks that may threaten depositors’ funds.