Eswatini

Temporary economic slowdown

The Kingdom of Eswatini is experiencing an economic slowdown that is expected to continue into 2027, driven by rising inflation, particularly fuel prices, a likely El Niño episode, and slower growth in tourism and public investment. That said, the slowdown should remain moderate as public-sector wages have recently been increased substantially, infrastructure development is continuing, and exports remain resilient, particularly sugar exports to South Africa.

The services sector continues to be the main pillar of the economy, accounting for more than 56% of value-added in Q4 2025, up by 9.9% year-on-year. This performance reflects growth in wholesale and retail trade, as well as financial and insurance services. Tourism has stayed resilient despite higher airfares. Although agriculture represents only 7% of GDP, it employs nearly 20% of the labour force. The spread of foot-and-mouth disease among livestock since May 2025 has affected incomes, which could also suffer from the effects of El Niño. The secondary sector relies on several export-oriented industries that continue to perform satisfactorily, including sugar, beverage concentrates, garments, sawn timber, pulp and chemicals.

Growth nevertheless remains primarily investment-driven, particularly through public and private infrastructure projects. Construction of the Mpakeni Dam is ongoing. A national programme launched in July 2026, valued at USD 175.7 million and financed 80% by the African Development Bank, has been earmarked for the construction of two major road corridors across the country. The Mkhondvo-Ngwavuma irrigation project (USD 2.8 billion, largely financed by international institutions) is progressing and will enable approximately 9,400 hectares of land to be cultivated. The Phuzumoya Strategic Oil Reserve project, backed by USD 300 million in financing from Taiwan, aims to establish a strategic reserve of 80 million litres of petroleum products. At the same time, private consumption, although hampered by widespread poverty, is benefitting from household credit growth (+7.1% year-on-year in March 2026) and public-sector wage increases. Rising energy prices pose a risk, but their impact on domestic demand is expected to remain limited. As inflation remains lower than in South Africa, the Central Bank of Eswatini has kept its policy rate unchanged at 6.75%, despite the 25 basis-point increase made by the South African Reserve Bank.

Heavier oil import bill

The fiscal deficit widened significantly between fiscal years 2024-2025 and 2025-2026, mainly as a result of higher public-sector wages. Phase II of the wage reform alone is estimated to have cost the government USD 13 million. Capital expenditure also increased. Consequently, total government expenditure rose from E32.6 billion to E35.6 billion in FY2025-2026, equivalent to 37.8% of GDP. This was compounded by a decline in revenues from the Southern African Customs Union (SACU), which fell by 20% in FY2025-2026 compared with FY2024-2025.

During FY2026-2027, the deficit is expected to remain high. Further increases in spending on wages, infrastructure, agriculture (subsidies) and healthcare should be offset by improvements in tax collection and SACU transfers. The former is based on digitalisation. In addition, the elimination of ghost workers and anti-corruption measures will contribute to the measures. The deficit is financed mainly through borrowing. The rise in debt has been driven by both domestic debt (50.6% of total debt) and external debt. External debt is owed primarily to multilateral creditors (67.3%), especially the World Bank and the African Development Bank, notably for financing public infrastructure, as well as to bilateral creditors. Debt-interest payments are becoming increasingly burdensome and are expected to account for 10% of budgeted expenditure in FY2026-2027.

With the higher oil import bill, as well as increased imports related to large infrastructure projects, the trade surplus and, consequently, the current account surplus have declined. The services balance remains in deficit, as transport and engineering costs exceed tourism revenues. Interest payments on debt and the income of foreign investors are offset by SACU transfers, international budget support and migrant remittances, although the latter have fallen sharply: they amounted to only USD 33.7 million in 2025, compared with USD 132 million in 2021.

Absolute monarchy fuels discontent

King Mswati III, who has ruled for 40 years, remains in power despite his unpopularity. The political system remains tightly controlled in Africa's last absolute monarchy: political parties are banned, demonstrations are systematically repressed and security, and institutional powers (including the dissolution of Parliament and the dismissal of ministers) are concentrated in the hands of the King. Of the 63 elected MPs (out of a total of 74 seats) in the most recent parliamentary elections held in September 2023, all are royalist. Public discontent is fuelled by high unemployment (35% in 2025 and 53% among young people), deficiencies in public services, poverty, corruption, and the absence of civil and political freedoms.

Eswatini maintains close relations with South Africa, its main trading partner, which accounts for 70% of its exports and 80% of its imports and hosts its expatriate workers. Institutional stagnation is a concern for the Southern African Development Community (SADC), although it is unlikely to intervene except in the event of a severe crisis. Eswatini is the only African country to maintain diplomatic relations with Taiwan despite pressure from Beijing. In June 2025, a USD 300 million loan agreement was signed with the Export-Import Bank of the Republic of China (Taiwan) to finance the construction of an oil reserve. This follows a trade cooperation agreement signed in 2024 and the recent announcement of Taiwanese financial support for the tourism and healthcare sectors. In August 2025, when the US imposed new tariffs on most countries, Eswatini was among the six African countries granted an exemption. The decision resulted from an agreement between the two countries concerning the acceptance of individuals deported from the US.

Last updated: August 2026