The IMF says Swaziland's economic growth will grind to near zero this year as the government's fiscal crisis rocks banks and private businesses.
Swaziland’s economic growth will grind to near zero this year as the government’s fiscal crisis rocks banks and private businesses, the International Monetary Fund (IMF) warned on Wednesday.
“The fiscal crisis has reached a critical stage. Government revenue collections are insufficient to cover essential government expenditures,” the IMF said after a two-week fact-finding mission to the kingdom.
Businesses dependent on government contracts were laying off workers or shutting down, the IMF said, projecting economic growth to slow to 0.3% this year.
Banks are also beginning to feel the pinch, head of mission Joannes Mongardini said, warning of an “outflow of deposits to South Africa” that was contributing to a liquidity problem.
“Key social programs, like the fight against HIV/Aids ... are being negatively affected”—in a nation where one in four people carry the virus, the IMF said.
“Even if the government were to finance just minimal expenditure like wages, there is a significant financing gap that needs to be covered somehow,” said Mongardini, who estimated the government’s unpaid bills could almost double to $306-million by March.
The international lender in August declared Swaziland’s financial reform programme a failure and has refused to extend loans until it reins in spending.
That assessment has made other international lenders reluctant to help Swaziland.
A R2.4-billion loan offered by South Africa in August is in limbo after Swaziland’s giant neighbour linked aid to IMF belt-tightening targets.
Recently Swaziland’s government has tried to meet some of the IMF’s demands but Mongardini called budget cuts tabled last week “insufficient,” saying: “Further cuts are needed, particularly on the wage bill.”
The government announced on Tuesday that it had raised from banks and parastatals 350-million emalangeni (about R350-million) reportedly needed to pay civil servants but warned that December pay checks could be in jeopardy.
Agence France-Presse reported on Tuesday that Swaziland pulled together enough loans from local banks and private businesses to pay government workers on time this month, a spokesperson said.
The announcement came after emergency to raise the $43-million reportedly needed to pay civil servants.
Swaziland’s financial problems stem from a sudden fall in revenue payments from the Southern African Customs Union but critics of the regime also blame poor economic management and widespread corruption because of the power wielded by Mswati and his inner circle.
In a country where two-thirds of the population live in poverty and one in four adults are HIV-positive, it is extremely vulnerable to the financial squeeze which has had a large impact on basic health and education services.
It has been more than a year since the IMF first advised Africa’s last absolute monarchy to slash its public wage Bill and overhaul its poorly managed economy.
Labour unions have joined forces with pro-democracy campaigns and since the beginning of the year have been staging frequent and noisy public protests, objecting to retrenchments and calling for political change.
The ongoing strikes seem to have paralysed the government which has failed to meet the IMF target to cut jobs and, as a result, cannot access emergency donor funding.
Backs to the wall
A plan announced by South Africa in August to lend its landlocked neighbour R2.4-billion appears to be on ice following resistance by Mswati to agree to conditions such as the unbanning of political parties and open dialogue about democratic reform.
Other reported possible bailouts coming from royal families in Kuwait and Qatar also seem to be either on hold or shelved indefinitely.
Pro-democracy protests, which rocked major urban centres and rural areas from September 5 to September 9, were part of a tightly organised series of demonstrations uniting the democratic movements in the cities of Mbabane, Manzini, as well as the rural areas including Siteki.
More than 4 000 participants joined the Swaziland demonstrations each day and parallel protests took place in South Africa, the UK, Denmark and Germany.
Médecins Sans Frontierès said in early September that they were almost out of HIV testing kits. Drug shortages meant many new patients were reportedly not being put on antiretrovirals (ARVs), while those who are already on ARVs were being given only one month’s supply at a time.—Staff reporter and AFP