IMF Staff Completes 2025 Article IV Mission to The Kingdom of Eswatini
An International Monetary Fund (IMF) staff team, led by Ms Xiangming Li, IMF mission chief for Eswatini, concluded its 2025 Article IV Consultation mission in Mbabane on 6 August 2025 after engaging in discussions with the country’s authorities.
The mission’s preliminary findings highlight a slowdown in Eswatini’s economic growth during 2024, with expectations for a rebound in 2025 driven by significant public and private investment projects. Growth is forecast to accelerate from 2.8 percent in 2024 to 4.3 percent in 2025, before moderating to the long-term average of 2.8 percent over the medium term. Inflation is expected to ease to 3.5 percent in 2025, down from 4.0 percent in 2024, broadly mirroring trends in neighbouring South Africa.
Despite an increase in Southern African Customs Union (SACU) revenues, the fiscal deficit widened to 2.3 percent of GDP in the 2024/25 fiscal year. The structural primary deficit, which excludes SACU revenues, increased by 1.1 percent of GDP in the same period. However, efforts to tighten this deficit by 1.8 percent of GDP are planned for the current year to curb rising public debt, which is projected to reach 42.9 percent of GDP, partly due to the regularisation of arrears.
The overall fiscal deficit is expected to rise to 4.7 percent of GDP in 2025, influenced by a sharp decline in SACU revenues and higher interest payments. The government has faced relatively expensive financing costs, with spreads on government securities reaching up to 3.75 percentage points above comparable South African bonds. To broaden its investor base, Eswatini issued 600 million rand in five-year bonds on the Johannesburg Stock Exchange in July 2025 at an interest rate of 12.175 percent. The government has also increased borrowing from international financial institutions to lower interest expenses and address arrears.
Over the next six years, the government aims to reduce the structural primary deficit by 1.9 percent of GDP, stabilising the public debt-to-GDP ratio at around 42.8 percent by mid-2031. Achieving this fiscal consolidation will depend on containing spending on goods and services, grants, and the wage bill measures that require strong structural reforms.
Key reforms emphasised by the mission include accelerating public financial management (PFM) improvements, such as implementing the Integrated Financial Management Information System to enhance budget control and amending the PFM Act to improve public investment management and reform of public enterprises. Concurrently, efforts to improve public service delivery through the ‘Government In Your Hand’ e-Government initiative and rationalising the civil service are underway to create fiscal space for priority expenditures.
The mission noted a slight weakening of Eswatini’s external position in 2024, with foreign reserves remaining below adequacy thresholds. The external current account surplus narrowed to an estimated 1.3 percent of GDP and is projected to turn into a deficit in 2025 as SACU revenues decline and imports rise with large investment projects underway. Disbursements from international financial institutions are expected to temporarily bolster reserves this year.
In monetary policy, the Central Bank of Eswatini maintained its policy rate at 6.75 percent on 1 August 2025, keeping a narrow differential of 25 basis points with South Africa following Pretoria’s rate cut on 31 July. The mission recommended aligning the policy rate more closely with South Africa’s to support the currency peg and safeguard foreign reserves. It also highlighted the importance of limiting cash advances to the government to exceptional cases to reduce capital outflows.
The financial system’s buffers remain adequate, though close monitoring of asset quality is necessary. The passage of updated legislation, such as the Financial Services Regulatory Authority Act, and finalising regulations for non-bank financial institutions, are crucial for maintaining financial stability. Operationalising the deposit insurance scheme and Emergency Liquidity Assistance facility will further strengthen the financial safety net.
To boost potential growth, the IMF mission urged a stronger focus on fostering private sector development by closing infrastructure gaps, streamlining regulations, reforming state-owned enterprises, expanding credit access, and enhancing governance. Addressing skill mismatches through improved technical and vocational training and broader education reforms is vital to tackling unemployment and inequality.
Ms Li thanked the Eswatini authorities for their excellent cooperation and warm hospitality during the mission.
