eSwatini Conducts First Debt Sustainability Analysis

The Ministry of Finance of eSwatini conducted its first debt sustainability analysis to assess the potential impact of recent macroeconomic developments on the country’s public debt dynamics. For a long time, the government of eSwatini maintained its public debt-to-GDP ratio below 20 percent, which is low compared to peers in the Sub-Saharan region. However, despite its middle-income status, eSwatini also faces infrastructure bottlenecks, including those relating to transport, electricity, and telecommunications, all of which increase the cost of doing business.

As part of efforts to address the infrastructure deficit and position the country as a competitive node for the region and as a new driver of growth, the government has been accumulating debt in recent years to finance infrastructure development projects. As a result, the pace of debt accumulation has been high since 2013. This, coupled with volatility of revenues from the Southern Africa Customs Union (SACU) transfers, raised both sustainability and liquidity concerns.

It is against this background that the Ministry of Finance conducted a debt sustainability analysis to determine the amount of borrowing that is consistent with medium-term debt sustainability and macroeconomic stability. The DSA workshop was conducted during the period 05 – 16 August 2019 at Piggs Peak Hotel in eSwatini. This is the first time for the Ministry of Finance to conduct a DSA on its own, with previous analyses conducted in the context of the Article IV consultations with IMF.

A MEFMI team, led by Mr. Tiviniton Makuve, and comprising of Messrs Nebson Mupunga and Patrick Ndzinisa, both Accredited Fellows of MEFMI, provided technical assistance to the Ministry.

The key output of the DSA was a debt sustainability analysis report detailing the key findings from the exercise and options for government to stabilize public debt dynamics as well as preserve macroeconomic stability while enhancing long-term growth potential. The Ministry of Finance intends to use the DSA findings to guide the budget formulation process as well as government’s borrowing decisions. The Ministry also intends to use the DSA findings to inform its engagement and dialogue with development partners. In addition, capacity of government officials to conduct debt sustainability analyses using the IMF’s framework for Market Access Countries was also built. The officials are expected to conduct subsequent exercises with minimal external support.