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Balance of Payments and International FDI Position in eSwatini: FY2019/20

eSwatini BoP and FDI Position: FY2019/20

eSwatini’s merchandise export earnings have been volatile since 2016. The fluctuations in export earnings have deteriorated eSwatini’s balance of payments and gross official reserves. The balance of payments deteriorated to a wider deficit due to volatility of the capital and financial account balance and the persistent outward foreign direct investment (FDI) outflows. These capital flows have been adverse for eSwatini’s balance of payments but improved the country’s net international FDI position. eSwatini’s balance of payments is projected to deteriorate to a wider deficit, which is projected to reduce gross official reserves in the medium-term.

 

Figure 1: Current Account Balance in eSwatini (2016-2024)

Current Account Balance in eSwatini (2016-2024)

Source: IMF 2020, eSwatini 2019 Article IV Consultation. Note: (*) Figures from 2019 onwards are projections.

 

Total merchandise imports to eSwatini decreased to USD 1.8 billion in 2018, from an annual average of USD 1.5 billion for 2015 to 2017[1]. Exports remained steady at USD 1.7 billion in 2018 which is equal to the annual average for 2015 to 2017[2]. The slower growth in exports has deteriorated eSwatini’s current account balance, which narrowed from a surplus averaging USD 16.9 million (approx. 5.6% of GDP) for 2016 to 2018, to a surplus of USD 12.1 million (approx. 3.8% of GDP) in 2019[3]. The slower growth in export earnings and widening capital and financial account deficit have deteriorated eSwatini’s balance of payments and gross official reserves have decreased.

 

Figure 2: Capital and Financial Account Balance in eSwatini (2016-2024)

Capital and Financial Account Balance in eSwatini (2016-2024)

Sources: IMF 2020, eSwatini 2019 Article IV Consultation. Note: (*) Figures from 2019 onwards are projections.

 

eSwatini’s capital and financial account balance improved from a deficit (net outflows) averaging -USD 570.6 million (approx. -0.3% of GDP) for 2016 to 2018, to a deficit of -USD 16.9 million (approx. -5.3% of GDP) in 2019[4]. eSwatini’s balance of payments deteriorated from a deficit averaging -USD 3.4 million (approx. -1.0% of GDP) for 2016 to 2018, to a deficit of -USD 4.5 million (approx. -1.5% of GDP) in 2019[5]. Gross official reserves decreased from USD 38.1 million in 2016 to USD 32.4 million in 2018, before continuing to decrease to USD 25.2 million in 2019[6]. During this period, eSwatini experienced volatile inward FDI and outward FDI flows.

 

Figure 3: Gross Official Reserves and Balance of Payment in eSwatini (2016-2024)

Gross Official Reserves and Balance of Payment in eSwatini (2016-2024)

Sources: IMF 2020, eSwatini 2019 Article IV Consultation. Note: (*) Figures from 2019 onwards are projections.

 

Inward FDI inflows deteriorated from USD 41.3 million in 2015 to net outflows of -USD 56.0 million in 2017, before improving to USD 25.4 million in 2018[7]. As a result, eSwatini’s inward FDI stock decreased from an average of USD 37.8 million for 2015 to 2017, to USD 25.2 billion in 2018[8]. eSwatini citizens increased their investments abroad as inward FDI to the country moderated.

 

Figure 4: Inward Foreign Direct Investment in eSwatini (2015-2018)

Inward Foreign Direct Investment in eSwatini (2015-2018)

Sources: UNCTAD 2019, UNCTADStat Database.

 

Outward FDI outflows increased from net repatriations of -USD 877,816.6 in 2015 to USD 65.4 million in 2017, before deteriorating to net repatriations of -USD 11.5 million in 2018[9]. As a result, eSwatini’s outward FDI stock increased from an average of USD 94.6 million for 2015 to 2017, to USD 125.1 million in 2018[10]. These capital flows have deteriorated eSwatini’s balance of payment but improved the country’s net international FDI position.

 

Figure 5: Outward Foreign Direct Investment from eSwatini (2015-2018)

Outward Foreign Direct Investment from eSwatini (2015-2018)

Sources: UNCTAD 2019, UNCTADStat Database.

 

eSwatini’s balance of payment has been supported by a persistent current account surplus despite the fluctuations in the levels and volatility of the capital and financial account balance in the period from 2015 to 2018. Outward FDI flows have been increasing which has improved eSwatini’s net international FDI position. However, eSwatini’s net international FDI position deteriorated from net liabilities amounting to an average of -USD 658.5 million (approx. -16.1% of GDP) for 2015 to 2017, to net liabilities amounting -USD 713.6 million (approx. -15.1% of GDP) in 2018[11].

 

Figure 6: International Foreign Direct Investment Position in eSwatini (2015-2018)

International Foreign Direct Investment Position in eSwatini (2015-2018)

Sources: UNCTAD 2019, UNCTADStat Database.

 

At these levels eSwatini’s foreign liabilities remain sustainable as a proportion of GDP. Given the relatively narrow domestic capital markets, eSwatini should focus on attracting inward FDI in sectors that will expand its productive capacity and diversify its exports because the country is still heavily dependent on agricultural exports. Nevertheless, eSwatini’s balance of payments surplus is projected to deteriorate to a deficit in the medium-term, which is projected to reduce gross official reserves.

 

Volatility in inward FDI inflows and the consistently narrowing current account surplus should deteriorate eSwatini’s balance of payments in the forward-looking medium-term. The current account balance is projected to deteriorate from a surplus of USD 12.1 million (approx. 3.8% of GDP) in 2019 to an average of USD 8.2 million (approx. 2.4% of GDP) from 2020 to 2024[12]. eSwatini’s capital and financial account balance is projected to improve to a deficit (net outflows) averaging -USD 10.2 million (approx. -2.9% of GDP) from 2020 to 2024[13]. Therefore, the balance of payment is projected to deteriorate from a surplus of USD 13.9 million in 2020 to a deficit of -USD 9.8 million in 2024, which is equivalent to an average deficit of -USD 2.0 million (approx. -0.5% of GDP)[14]. Thus, eSwatini’s gross official reserves are projected to increase from USD 25.2 million in 2019 to USD 38.9 million in 2020, before decreasing to USD 12.0 million in 2024[15].

 


[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 8 March 2020].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] IMF 2020. eSwatini 2019 Article IV Consultation, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 8 March 2020].
[4] IMF 2020. eSwatini 2019 Article IV Consultation, ibid.
[5] IMF 2020. eSwatini 2019 Article IV Consultation, ibid. There are relatively significant errors and omissions in eSwatini’s balance of payments data equivalent to -USD 18.1 million in 2016, -USD 20.4 million in 2017 and USD 20.6 million in 2018.
[6] IMF 2020. eSwatini 2019 Article IV Consultation, ibid.
[7] UNCTAD 2019. UNCTADStat Database, ibid.
[8] UNCTAD 2019. UNCTADStat Database, ibid.
[9] UNCTAD 2019. UNCTADStat Database, ibid.
[10] UNCTAD 2019. UNCTADStat Database, ibid.
[11] UNCTAD 2019. UNCTADStat Database, ibid.
[12] IMF 2020. eSwatini 2019 Article IV Consultation, ibid.
[13] IMF 2020. eSwatini 2019 Article IV Consultation, ibid.
[14] IMF 2020. eSwatini 2019 Article IV Consultation, ibid.
[15] IMF 2020. eSwatini 2019 Article IV Consultation, ibid.

 

 


Siyaduma Biniza

Siya is the Executive Director at PESA.

Siyaduma Biniza

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