E3.79bn loan: CANGO warns govt

The Coordinating Assembly of Non-Governmental Organisations (CANGO) has warned government against taking on new debt as the country faces the threat of El Niño.

CANGO Executive Director Thembinkhosi Dlamini said the expected climate shock could weaken the economy and make loan repayments more difficult. Dlamini said borrowing heavily ahead of a possible drought could put additional pressure on government finances at a time when the country may need more money for emergency relief, food assistance and support for affected communities. This is after reports that government through the ministry of finance is seeking to borrow E3.79 billion through three loan bills tabled by Minister of Finance Neal Rijkenberg in the House of Assembly on Thursday.

Government seeks to borrow E2.74 billion through two proposed loan facilities to settle outstanding financial commitments arising from last year’s supplementary budget, which Rijkenberg said contributed to the accumulation of unpaid bills owed to suppliers and contractors. Government has also disclosed that it still needs to raise another E1.5 billion to finance the current financial year’s budget, with the possibility of additional borrowing if revenue collections fall below expectations.

In one of the proposed borrowing arrangements, government intends to obtain up to E1.6 billion from Standard Bank of South Africa Limited and other lenders to finance infrastructure and social development projects.

The proposed loan is contained in the Standard Bank of South Africa Limited Loan Bill, 2026, published in the Eswatini Government Gazette Extraordinary No. 91 dated October 29.

The bill seeks to authorise the minister to raise a loan not exceeding E1.6 billion with Standard Bank of South Africa Limited serving as the sole mandated lead arranger and book runner.

Dlamini said the possible effects of El Niño should be considered carefully before government commits itself to additional debt.

“Contracting new debt in the face of the impending El Niño is a bad idea for the country. El Niño introduces severe economic uncertainty, which makes taking on new commercial or high cost public debt particularly risky for the country,” he said.

He explained that the effects of drought could spread beyond farming, affecting government revenue, businesses and the livelihoods of rural communities.

“Since agriculture and downstream manufacturing account for a significant share of the country’s economy and rural livelihoods, failed harvests would have consequences across the economy. When harvests fail, corporate tax receipts from major processors can fall, tax collection from rural supply chains can dry up and government revenue can shrink at the same time,” Dlamini said.

He said this could leave government facing lower income while still being required to meet its loan repayment obligations. “Borrowing during or immediately before such shocks creates a double squeeze. Government faces declining revenue while its debt service obligations remain fixed and continue to place pressure on public finances. This can crowd out spending on emergency relief and reduce the country’s ability to respond when liquidity or emergency financial assistance is needed most,” he said. Meanwhile, the proposed Standard Bank loan comes at a time when the country’s public debt has reached E43.04 billion. As of September 29, public debt stood at 41.63% of the country’s gross domestic product (GDP).

The debt comprises E22.82 billion in domestic borrowing, equivalent to 22.07 per cent of GDP, and E20.22 billion in external debt, representing 19.56% of GDP.

According to the memorandum of objects and reasons accompanying the Standard Bank Loan Bill, the funds would finance infrastructure and social development projects agreed upon by government and the arranger as well as other eligible social expenditure and related costs. However, the proposed loan would also come with financial obligations, including interest payments arranging fees and annual facility management charges.

CANGO has raised concerns over government’s management of public resources, warning that increased borrowing and public expenditure must translate into tangible improvements of people’s lives, particularly amid persistent poverty, unemployment and shortages of essential medicines.

“However, the greatest challenge remains translating these commitments into tangible improvements in people’s lives,” he said. He identified persistent shortages of essential medicines, high youth unemployment, poverty and inadequate social protection coverage as some of the major concerns requiring urgent attention.