There is a common misconception about financial crises. Most people imagine they arrive dramatically, with collapsing markets and all. In reality however, they rarely announce themselves.
Financial pressure often creeps into household budgets, shows itself in small loans that become slightly larger, in savings that quietly shrink, in businesses leaning a little more heavily on borrowed money and in a country’s financial cushion becoming just a little thinner than it was the month before.
Individually, those changes rarely seem alarming. Taken together, they begin to tell a story. That is precisely why the Central Bank’s latest Monthly Statistical Release deserves attention.
Last month, the statistics showed an economy growing more dependent on credit while its financial cushion thinned. This month’s figures show those trends have become more pronounced.
Economic statistics are never just numbers. They become grocery bills, school fees, loan repayments and the quiet calculations families make around kitchen tables every payday.
The real story, therefore, is not whether the numbers changed. It is how they changed.
Pressure shows itself in borrowing first
If there is one place where financial pressure usually reveals itself before anywhere else, it is borrowing.
Household credit has continued to grow, rising from E9.6 billion in April to E9.8 billion in May. More revealing, however, is the pace of that growth. Annual growth has accelerated from 10.8 to 14.4 per cent. That is not a trivial change. Nor should it automatically be viewed as bad news.
Borrowing has an important place in any growing economy. Used carefully, credit can build wealth rather than destroy it.
The concern lies elsewhere: the strongest growth is in unsecured personal loans, which rose from E3.9 billion to E4.1 billion in one month. It is also worth remembering what that borrowing costs. With prime at 10.25 per cent and unsecured loans priced well above it, a loan has to work hard before it leaves a household better off.
The statistics cannot tell us why each household borrowed more, but they do invite an uncomfortable question. Are more households borrowing to build tomorrow, or simply to get through today?
There is an important difference. Borrowing to increase future income is an investment. Borrowing to cover ordinary monthly living costs is often a symptom. One creates future capacity. The other postpones today’s pressure.
Good financial decisions are rarely about whether money is available. They are about what that money is being asked to do.
While borrowing rises, saving slips
The borrowing story has a quieter twin. While households took on more credit in May, savings deposits fell by 0.6 per cent to E2.3 billion, and time deposits slipped to E14.2 billion. Meanwhile, cash circulating outside the banks rose by 2.3 per cent.
One number captures both sides. For every lilangeni banks held in deposits, they had lent out 84.1 cents, up from 81.4 a month earlier. Borrowing is rising against a deposit base that is thinning. Savings that quietly shrink rarely announce themselves either.
The story has also changed for small businesses
Last month brought one encouraging development: SMEs were driving much of the growth in business lending.
This month, the picture is more complicated. Credit to SMEs declined by 4.7 per cent in May, reducing their share of total business credit from 34.5 per cent to 31.5 per cent, while lending to larger businesses increased sharply. To be fair, SME credit is still 11.6 per cent higher than a year ago, growing faster over twelve months than large enterprises. The pullback is one month, not yet a retreat.
One month does not establish a trend, but something has shifted. And when financial behaviour begins to change, it is worth paying attention before the consequences become obvious.
Country’s cushion becoming thinner
If borrowing tells us how households and businesses are responding to the economy, the country’s foreign reserves tell us how much room the economy itself has left to absorb a shock.
Here, too, the latest figures point in one direction. Last month, we noted that gross official reserves had fallen to E8.7 billion, reducing import cover from 2.3 months to two months. One month’s decline, we argued, did not signal trouble, but it reduced the margin for error.
This month’s figures show the trend has continued. Gross official reserves have declined again, to E8.1 billion, and import cover has slipped to 1.9 months.
Two qualifications belong here. Part of the annual decline is a currency story: measured in special drawing rights, reserves are 8.6 per cent higher than a year ago, though the past month’s fall is real in both currencies. And reserves rise and fall with quarterly SACU receipts, so some of the movement is seasonal. The figures are also provisional.
One month’s decline can often be explained by timing. Two consecutive months, even allowing for that seasonal rhythm, deserve closer attention. Eswatini imports much of what keeps its economy moving, from fuel and medicines to fertiliser and food. Foreign reserves are, in effect, the country’s emergency savings account. The IMF conventionally treats three months of import cover as the comfort line; at 1.9 months, Eswatini is well under it.
That does not mean a crisis is around the corner. It does mean the economy has become a little less forgiving. Imagine two families on the same income. One has six months’ worth of savings in the bank. The other has barely enough to cover the next few weeks. The difference only becomes obvious when something goes wrong. Countries are not households, of course, but the principle is similar.
Government is leaning on the cushion too
A third thread ties these stories together: government itself. Net claims on government more than doubled in May, from E1.0 billion to E2.1 billion, driven by a 14.3 per cent rise in claims following an advance from the Central Bank. The Bank also attributes part of June’s reserve decline to settling government fiscal obligations.
Households, in other words, are not the only ones borrowing to bridge the month. None of this is unusual in isolation. But when the same pressure appears in household borrowing, national reserves and government financing within a single release, it becomes harder to dismiss any one of them as noise.
Confidence, caution now living side by side
The most striking thing about this month’s report is the contradiction running through it. On one hand, the economy continues to move. Banks are still lending. Households continue to access credit.
On the other hand, several of the economy’s protective buffers are becoming thinner. It is worth being precise about which ones. The banks themselves remain comfortably liquid, holding E2.9 billion more than regulations require. The thinning sits with families and with government, not with the banking system. That is not what an economy in freefall looks like. Nor is it what a booming economy looks like. It is something in between. An economy still moving forward, but with progressively less room for error.
When conditions are strong and predictable, mistakes can often be absorbed. When uncertainty increases, the same mistake becomes more expensive. Borrowing a little too much. Expanding a business too quickly. Ignoring savings for another month. Such decisions do not become disastrous, simply riskier.
What households should take from this
Over the past six weeks, this column has explored inflation, financial habits, borrowing and the systems that shape our financial lives. The latest statistics do not replace those lessons. They reinforce them.
If household borrowing is accelerating while the country’s financial cushion continues to shrink, then resilience becomes even more valuable.
That means asking harder questions before taking on new debt. Not, “Can I qualify for this loan?” But, “Will this loan leave me financially stronger a year from now?”
The same applies to savings. An emergency fund has always been a good idea. In an economy with less room for error, it becomes insurance against uncertainty. How much is enough? If reserves covering less than two months of imports leave a nation exposed, a family holding less than a month of expenses is exposed in the same way. Three to six months of essential costs is the sensible target. The direction of travel matters more than the destination.
What about businesses?
Business owners should resist the temptation to read continued credit growth as proof that confidence has returned. Some larger businesses are continuing to invest. Smaller firms, however, borrowed noticeably less in May, and the figures cannot tell us whether that was their choice or their banks’ choice.
Growth should not be confused with permanence. The two explanations point in different directions. If smaller firms are choosing caution, follow their lead and build reserves. If credit is quietly tightening, secure facilities early, while the business still qualifies comfortably. Prudent owners will prepare for both.
Just as households should avoid assuming tomorrow will solve today’s financial pressures, businesses should avoid assuming today’s growth will continue into tomorrow.
Message inside the numbers
Most people never read the Central Bank’s monthly release, and that is understandable. On its own, it is a technical document. Looked at over time, it becomes less a collection of statistics than a conversation about the direction in which the economy is traveling.
This month’s conversation is remarkably consistent with the one we began several weeks ago. Borrowing continues to rise. Savings are slipping. Government is leaning harder on its banker. The country’s financial cushion continues to narrow. Some businesses are becoming more cautious or are finding credit harder to reach.
And that may be the biggest lesson this week. Financial resilience is rarely built when the crisis finally arrives. It is built while the warning signs are still quiet enough for most people to ignore.
The numbers have started whispering. The wisest households and businesses will not wait for them to start shouting.