BY PHUMELELE MKHONTA
MBABANE – Resilient in testing times!
This is the Eswatini financial sector, according to Central Bank of Eswatini (CBE) Governor Dr Phil Mnisi. The Governor said this earlier today at the launch of the ‘CBE Financial Stability Report Issue No. 6’ at Happy Valley Hotel in Ezulwini.
Worth noting is that the CBE has made it its mandate to compile the above-mentioned report annually, to influence policies in the country.
During his deliberation, Mnisi said he was happy to confirm that overall, the financial sector remained resilient to the economic disruptions associated with the COVID-19 pandemic and the Russia-Ukraine war, amongst others.
“Banking institutions in Eswatini maintained adequate capital and liquidity buffers to absorb the shocks. This has largely been made possible by the CBE monetary policy and macro-prudential policy measures.
“Even though measures have been put in place to contain the spread of the coronavirus, the post-pandemic phase continues to present a challenging operating environment for financial institutions. Systemic risks to financial sector stability remain elevated, especially from credit risk and operational risk,” said Mnisi.
Explaining the importance of the report which was being launched, the Governor said as a preamble, he would like to highlight that financial stability analysis involved a continuous assessment of potential risks to the financial system and the subsequent development of policies to mitigate these risks.
“The early detection of risks to the financial system is necessary to give policymakers sufficient lead time to take pre-emptive action to avert a systemic crisis. And, annually, the CBE is mandated to publish a Financial Stability Report (FSR).
“The FSR is intended to enhance the understanding of financial system vulnerabilities among policymakers, financial market participants, and the public. By making the FSR available to the public, the Central Bank aims to stimulate debate on policies necessary to manage and mitigate risks to the financial system. Better public awareness of financial system vulnerabilities may encourage financial institutions to curb activities that might exacerbate systemic risks and promote policy reforms to strengthen the resilience of the financial sector.”
Discussing the external economic environment, the CBE Governor further said the global financial conditions tightened notably in the year to June 2021 against a backdrop of persistent geopolitical risks, currency pressures and high inflation, saying consequently, risks to global financial stability remained elevated.
“There has been a prevalence of high inflation, prompting an acceleration of the pace of monetary policy normalization. There is an increased risk of disorderly financial conditions tightening in the path to monetary policy normalization that may interact with pre-existing vulnerabilities.
“The lingering effects of COVID-19 and the on-going Russia-Ukraine invasion have contributed to the rising international commodity prices and supply chain disruptions. This has prompted global and domestic tightening in monetary conditions and liquidity. Global inflation has accelerated to the highest levels seen in over four decades, particularly in advanced economies.
