Eswatini’s banking sector is relatively small with assets of about 30% of GDP. The financial sector is dominated by non-bank financial institutions (“NBFs”) i.e., the pensions sector, insurance sector and collective investment schemes, with gross assets accounting for about 110% of GDP, including a large government retirement fund (with assets of about 35% of GDP). The financial institutions are closely interconnected and have large foreign exposures, with NBFIs providing a sizable share of banks’ deposits while holding about half of their assets abroad (about 40% of GDP), exposing the system to external shocks. Households are highly leveraged compared to neighboring and other middle-income countries; and the sovereign-financial sector linkages have been strengthening, exposing the sector to the government’s weak fiscal position.
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