Mbabane– According to the Minister for Finance Honourable Neal Rijkernberg, the government’s debt-to-GDP ratio could rise from about 45 per cent to 50 per cent as the country continues borrowing to finance projects and support economic growth.
Rijkenberg, responding to concerns over the government’s continued borrowing despite headlines pointing to an improving economy, said Eswatini had deliberately taken on some loans to help move the economy into a higher-growth phase.
He said the country’s growth rate was currently around five per cent, compared with an average of about 2.7 per cent over the two decades preceding COVID-19.
According to the minister, the stronger growth figures were real and Eswatini was now in its third year of averaging about five per cent growth.
“We have managed to get the growth up by doing, like, taking on a few loans and trying to push the economy to be able to get into a new growth kind of phase,” Rijkenberg said.
He, however, acknowledged that the increase in borrowing could put pressure on government finances, saying the debt-to-GDP ratio was expected to rise to about 50 per cent before being brought back down to 45 per cent under the country’s newly adopted medium-term fiscal framework.
The five-year framework, he said, would require government to identify which projects could be financed while leaving out projects that could not be accommodated within the available fiscal space.
“There were discussions and debates going on, as you can imagine, because everybody wants certain things to be financed by the government,” he said.
Rijkenberg said government considered a debt level of about 45 per cent of GDP to be sustainable, while reaching around 60 per cent could put the country under distress, particularly if economic growth did not improve sufficiently.
His remarks come against the backdrop of growing public concern over government borrowing and whether the economic growth reflected in official figures was being felt by ordinary people.
Addressing that concern, the minister argued that economic growth should not only be assessed by looking at people’s immediate cash-flow pressures.
He said households could be under financial pressure even when their material circumstances had improved over time, partly because of increased access to credit and the social pressure to maintain certain lifestyles.
According to Rijkenberg, people were increasingly taking on personal debt to meet expectations around the cars they drive, the clothes they wear, the schools their children attend and other aspects of their lifestyles.
He said this could leave households feeling financially squeezed despite improvements in their standard of living.
“At the end of the day, we are better off. We’re probably under worse cash flow pressure because of our loans that we’ve taken out to be able to do things,” he said.
The minister nevertheless acknowledged that borrowing was not the only challenge facing the economy, highlighting unemployment as a major concern.
“We’ve got an unemployment crisis,” Rijkenberg said, adding that unemployment remained at way too high levels.
He called for government, the private sector and other stakeholders to work together to strengthen the economy and create employment.
Rijkenberg’s comments therefore point to a difficult balance facing government: borrowing can help finance projects and support economic expansion, but rising debt also creates future repayment and cash-flow obligations.
The minister maintained that the country remained in a relatively healthy debt position for now, while the medium-term fiscal framework was intended to ensure that borrowing and government spending remained on a sustainable path.
At the same time, he acknowledged that stronger economic growth had not removed the pressure being experienced by ordinary people, particularly those struggling with unemployment and personal debt.
The central challenge, he said, was to translate economic growth into a stronger economy capable of addressing the country’s unemployment crisis.
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