By Ntombi Mhlongo
The Government of the Kingdom of Eswatini’s external public debt is expected to decline in the next financial year as five loans with different global and regional institutions will be maturing.
Notably, most of the loans the government committed itself to were for budgetary support to implement some infrastructure projects. As of the end of December 2022, the total debt stock stood at E31.7 billion, which is equivalent to 42.7 per cent of the gross domestic product (GDP).
Of this stock, external debt stood at E14.39 billion equivalent to 19.5 per cent of GDP and domestic debt stood at E17.36 billion, which is equivalent to 23.35 per cent of GDP. This will help put the country in a better position in terms of public debt management.
A maturity date on a loan is the date that is scheduled to be paid in full. The loan and any accrued interest should ideally be paid off in full if an organisation or country made regular and timely payments.
If the organisation does have a remaining balance past the maturity date, it will have to work with the lender to figure out how to pay it off.
Also, if an organisation is not able to pay the loan by the maturity date, the lender will probably charge a late fee.
The organisation or government will also continue to accumulate interest on the unpaid parts of your loan, meaning it will get more expensive over time. In the case of Eswatini, the maturity of the five loans is a positive development because the government will avoid fines for late payments.
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Also, the government will be able to service other loans which it is expected to start repaying in the next financial year as their grace period comes to an end.
When presenting the Budget Speech last month, the Minister of Finance Neal Rijkenberg highlighted that public debt management is one of the key objectives for the government in ensuring that the debt stock remains sustainable by raising the required funding at the lowest possible cost over the medium to long term, consistent with a prudent margin of risk.
Rijkenberg highlighted that even though the debt stock has grown over the past few years, the country has managed to keep the cost of the domestic debt within reasonable levels and has ensured that all of its external debt remains concessional.
The minister also detailed the number of loans taken by the government with a five-year grace period. The loans were taken during the 2018/19 financial year and this indicates that the government is expected to start paying them in the next financial year,2023/2024.
Those loans with a five-year grace period include the AfDB Manzini Region Water Supply (E720 million), AfDB Manzini Golf Course Inter-Change Development (E540.3 million), BADEA LUSIP II Extension (E15 million), and the IFAD Financial Inclusion (E161 million).
The rest are the ICC Supplementary Loan (E162 million), World Bank Network Reinforcement at Shiselweni Region (E630 million), World Bank Water Supply and Sanitation in the Shiselweni Region (E45 million), World Bank Health System for HCP (E20 million), Exim Bank India New Parliament Building (E108.28 million) and Exim Bank India Data Recovery Site (E10.4 million).
In total, the number of loans which have a grace period of five years and the government will start paying stands at E2.4 billion. Worth mentioning is that Rijkenberg recently said the government will not be taking any loans in the coming financial except for one meant for the probase project for the country’s roads.