What Is the SZL (Swaziland Lilangeni)?

The Swaziland lilangeni is the national currency of Swaziland, which as of April 2018, is officially known as the Kingdom of Eswatini. One SZL is subdivided into 100 cents and issued by the Central Bank of Swaziland. Foreign exchange markets abbreviate the currency as SZL.

The SZL is pegged to the South African Rand (ZAR). As of August 2020,1 SZL (and 1 ZAR) is equal to roughly US $0.06.

Key Takeaways

  • The Swaziland lilangeni (SZL) is the African nation of Swaziland's (Eswatini) official currency.
  • The SZL was introduced in 1974 and remains pegged to the South African rand.
  • Swaziland and its currency peg operate under the broader Common Monetary Area of southern African nations.

Understanding the Swaziland Lilangeni

The Monetary Authority of Swaziland introduced the lilangeni to replace the South African Rand at par in 1974. The two currencies have remained pegged at par since replacement.

The establishment of the Rand Monetary Area (RMA) in 1974 allowed Swaziland, Botswana, and Lesotho to issue currencies unique to their nations. Before the agreement, Swaziland participated in an informal arrangement among the same countries. Under the previous provision, only the South African currency circulated in the region. Through the agreement, the South African rand remained legal tender in all member nations and circulated alongside national money of the member nations. Botswana withdrew from the agreement in 1975.

In 1986, following the substantial depreciation of the rand, the countries replaced the Rand Monetary Area with the Common Monetary Area (CMA) to manage monetary policy. The CMA and the Southern African Customs Union work together to help member nations. The terms of the new agreement provided Swaziland additional flexibility in its monetary policy. 

The Swaziland Lilangeni and the Common Monetary Area

The new CMA agreement gave Swaziland several benefits.

Under the Common Monetary Area (CMA) agreement, Swaziland has the option to abandon the lilangeni’s peg to the South African Rand. Though it has had the option to set its exchange rates, Swaziland has maintained the lilangeni’s peg to the South African Rand to date, in part to maintain price stability and ease trade with the other member states.

Unlike other CMA members, Swaziland is exempt from holding foreign exchange reserves sufficient to cover its circulating currency at the South African Reserve Bank, the central bank of the Republic of South Africa. Foreign exchange reserves. Foreign exchange reserves are reserve assets held by a central bank in foreign currencies, used to back liabilities a nation's issued currency as well as to influence national monetary policy.

Swaziland ceased to accept the South African rand as legal tender following the signing of the new agreement. In 2003, however, Swaziland re-authorized acceptance of the South African rand to ensure unrestricted flow of funds in the areas. As long as the peg lasts, the value of the lilangeni and the economic status of Swaziland will remain tied to conditions in the South African economy, particularly concerning inflationary pressures.

At the same time, Swaziland’s interest rates can and do differ from those in South Africa. This difference gives the Central Bank of Swaziland latitude to cushion its economy from South Africa’s economic changes at the bank’s discretion.

The Swaziland Economy

Swaziland, located in Southern Africa, is one of the smallest landmass nations on the continent. A diarchy or joint monarchy rules the country. Many of the political and legal structures take a basis from the British and Dutch colonial rule of Southern Africa. Swaziland received recognition of independence in 1881 but would become a British protectorate in 1903. British control continued until 1968 when the area regained independence. 

Swaziland has a small developing economy with its primary trading partner being South Africa, the U.S, and the European Union. The nation has seen an economic slowdown in recent years, in part due to ongoing drought conditions. Nearly three-quarters of the population are subsistence farmers on the low-yielding land. 

In 2015, Swaziland was suspended from the U.S. African Growth and Opportunity Act due to concerns over its ability to meet democratic standards around freedom of peaceful assembly laid out in the Act's eligibility criteria. In 2018, the U.S. government restored Swaziland’s eligibility for the program.

In the meantime, the country’s economic growth between 2015 and 2019 remained slow. According to 2019, World Bank data, Swaziland experiences a 1.04% annual gross domestic product (GDP) growth and experienced an inflation rate of 2.58%.