The 0.25 percentage point gap between the policy rates of Eswatini and South Africa could make credit more expensive rather than cheaper, according to an International Monetary Fund study published in mid-October. The risk has returned to the spotlight after South Africa raised its rate to 7.25% on 19 October.
The Central Bank of Eswatini still had a rate of 7.00% and a prime rate of 10.50% on 22 October. The country therefore remains below South Africa, a configuration the study links to a gradual rise in local bank rates.
The lilangeni is pegged at par to the rand within the Common Monetary Area, where capital flows freely. Large depositors can move their funds to South Africa when returns there become more attractive, forcing local banks to defend their funding.
The IMF notes that decisions by the South African central bank pass almost entirely through to average lending rates in Eswatini within a month. Changes in the Eswatini rate, by contrast, have a limited effect on deposit rates. To protect their profitability, banks may then raise their lending margins.
Since 2000, the study identifies four periods during which the Eswatini rate remained below the South African rate. The gap that reappeared in May 2026 had been closed when Mbabane raised its rate to 7.00% in September, before the new South African increase on 19 October.
The strain falls on a market where access to financing for small businesses remains fragile. The public guarantee scheme supported 116 new applications in the financial year ended at the end of March 2026, compared with 146 a year earlier. The corresponding loans reached 38.8 million emalangeni, down 3.5% year on year, according to the central bank.