Credit Growth Outpaces Inflation as Eswatini’s Economy Maintains Momentum

By: Nkosiyabusa Nsibande

Eswatini’s economy entered the second quarter of 2026 with signs of resilience as private sector borrowing continued to expand, inflation remained subdued, and economic growth held above five percent, creating a more favorable environment for business activity despite emerging pressures on external reserves and trade performance.

The latest Recent Economic Developments report published by the Central Bank of Eswatini shows that economic activity, measured through Quarterly Gross Domestic Product (QGDP), grew by 5.7 percent year-on-year during the fourth quarter of 2025. Although slightly lower than the revised 5.9 percent recorded in the previous quarter, the growth rate remains among the strongest seen in recent years and suggests that domestic demand and productive activity have continued to support economic expansion.

Key Economic Indicators

 Indicator​Latest Reading

GDP Growth 5.7Inflation​2.0%

Private Sector Credit: E23.3 billion

Prime Lending Rate 10.25%

Public Debt: E41.2 billion

Trade Surplus: E78.4 million

One of the most notable developments in the report is the continued expansion of credit extended to the private sector. Outstanding private sector credit reached E23.3 billion at the end of April, representing annual growth of 9.5 percent and monthly growth of 0.7 percent. The increase suggests that businesses and households continue to access financing despite lending rates remaining relatively elevated.

The expansion in private sector borrowing significantly outpaced inflation, which stood at just 2.0 percent in April after five consecutive months of moderation in consumer prices. While inflation edged higher from 1.6 percent recorded in March, it remains well below historical averages and provides businesses with a more predictable operating environment.

The combination of moderate inflation and expanding credit is particularly important for investment activity. Lower inflation preserves purchasing power while improving the real value of borrowing, allowing businesses to finance expansion plans with greater certainty over future costs. For households, stable prices help sustain disposable income, which in turn supports consumer spending across the economy.

Monetary policy conditions also remained unchanged during the review period. The Central Bank maintained the discount rate at 6.75 percent while the prime lending rate remained at 10.25 percent. The decision reflects a balancing act between supporting economic growth and maintaining macroeconomic stability amid a volatile global environment.

Financial system liquidity, however, presented a more mixed picture. Broad money supply (M2) declined by 3.8 percent month-on-month to E26.7 billion in April, although it remained 12.8 percent higher than a year earlier. The contraction was largely driven by a decline in quasi-money deposits, particularly time deposits, which fell by 10.4 percent during the month.

In contrast, narrow money supply expanded strongly, growing by 5.8 percent month-on-month to E10.2 billion. Rising demand deposits and higher currency circulation supported the increase, suggesting stronger transactional activity within the economy even as longer-term savings instruments weakened.

Private Credit vs. Inflation

Private Sector Credit Growth (y/y)   █████████ 9.5%

Inflation Rate (y/y)                 ██ 2.0%

 The divergence between credit growth and inflation highlights a financial sector that continues to support economic activity without generating significant price pressures. For policymakers, this represents a relatively favorable macroeconomic position, as growth is being financed without creating substantial inflationary risks.

However, not all indicators pointed in the same direction. Gross official reserves declined sharply to E8.8 billion at the end of May, representing a monthly contraction of 13.7 percent and leaving the country with import cover equivalent to two months. Reserve adequacy remains a key metric for investor confidence and external sector stability, making future reserve performance an important area for monitoring.

At the same time, total public debt increased to E41.2 billion, equivalent to 39.5 percent of GDP. Although still below levels considered critical in many emerging economies, the upward trajectory reinforces the importance of maintaining fiscal discipline while ensuring sufficient investment in growth-enhancing sectors.

The overall picture emerging from the Central Bank’s report is that of an economy still benefiting from robust domestic activity and supportive financial conditions. Strong credit growth, moderate inflation, and sustained GDP expansion provide evidence that businesses continue to invest and operate in an environment characterized by relative macroeconomic stability.

The challenge for policymakers moving forward will preserve these gains while addressing vulnerabilities in external reserves and ensuring that credit expansion translates into productive investment capable of sustaining long-term economic growth.