Financial Markets

The Financial Markets Department implements monetary policy decisions, manages the country’s official reserves and, as an agent of government, issues and manages government debt securities.

The department has the following responsibilities:

  1. Managing the country's official foreign exchange reserves in terms of the Central Bank Order of 1974.
  2. Participating in the spot foreign exchange markets to service the foreign exchange needs of the Bank and the government.
  3. Managing risks inherent in the management of foreign exchange reserves, all market operations conducted by the Financial Markets Department, as well as all functions conducted on behalf of Government by the department.
  4. Acting as a funding agent of the Government by conducting bond and Treasury Bill auctions, participating in the formulation of debt management strategies.
  5. Ensure the effective functioning of the domestic financial markets. The department also monitors the Primary dealers and ensure their compliance with the primary dealer agreement.
  6. The settlement section performs the accounting functions for all transactions conducted by the Department in the domestic and foreign exchange markets as well as transactions related to its foreign reserves management functions.
  7. Providing market information and analyses to assist various Bank committees and the Executive Committee in their decision-making processes.

Rationale for holding Reserves

The Central Bank of Eswatini order of 1974 mandates the Bank to hold and manage the country’s foreign reserves. The rationale for holding foreign exchange reserves differs from country to country. Since Eswatini operates a fixed exchange rate regime where the Lilangeni is pegged one-to-one with the South African Rand, a stock of liquid foreign currency assets is required to manage imbalances in the demand for, or supply of, the Lilangeni in order to maintain the exchange rate peg.

The Central Bank of Eswatini, therefore, holds reserves for the purposes below:

  • To provide for a liquidity buffer against shocks to the balance-of-payments and provide confidence to financial and capital market participants.
  • Maintain confidence in government’s monetary & exchange rate policies; and align with the trilateral monetary agreement of the Common Monetary Area (CMA).
  • To serve as a store of wealth for the country

Domestic Markets

A domestic market is a financial market within a given country also known as domestic trading. It is a country’s internal market, representing the mechanisms for issuing and trading securities of entities domiciled within that nation. The domestic market has a more limited scope than international markets.

  • Market players constitutes all investors whether Institutional, Corporate or individual
  • Commercial banks usually dominate the financial sector
  • Nonbank financial institutions are widely regarded as being critical for bond market development given their long-term investment strategies.
  • Longer-term instruments help pension funds manage some risks, as well as providing a useful benchmark for pricing long-term assets.

The savings constraint is a key impediment to financial market deepening and development of the domestic market. Low savings result in a low level of financial intermediation by banks

Role of the Central Bank

The Central Bank of Eswatini as fiscal agent for the Government is responsible for raising funds in the domestic market by issuing Government securities namely treasury bills and Government bonds. The issuance of these securities is facilitated by the Domestic Markets Office under the Central Bank’s Financial Markets department. These Government securities are a major means of financing Government deficits and they further provide additional investment avenues for investors. Government securities are the most secure investment by far since it is rare for the government to default or honour its obligations. In Eswatini, treasury bills and bonds are issued under the provision of the Treasury Bills and Government Stock Act of 1994 (Amended in 2010) which sets a debt ceiling for the Minister of Finance at 25 percent of GDP.



© Central Bank of Eswatini 2021

Mahlokohla Street, Mbabane, Eswatini
PO Box, 546 Mbabane (H100)
[+268] 2408 2000
[+268] 2404 7865