Africa

IMF urges Swaziland to reduce state wage bill

Louise Redvers

Swaziland's economic woes continue and the International Monetary Fund has forecast a gross domestic product contraction of 1.5%.

Swaziland is still feeling the impact of the 70% drop in revenue from the Southern African Customs Union (Sacu) in 2009. (Reuters)

THe IMF has also forecast a "challenging" fiscal year ahead for the government.

The landlocked country is still feeling the impact of the 70% drop in revenue from the Southern African Customs Union (Sacu) in 2009 and 2010 that, late last year, forced the government to mortgage state assets to pay wages.

Small and medium private businesses that rely on the state for contracts have also been hit hard, either taking fewer orders or not being paid on time, which has led to redundancies and closures.

In a statement issued at the conclusion of a two-week mission to Swaziland, the IMF urged the government to reduce its wage bill (one of the highest in the region and accounting for half of public expenditure) and "non-priority recurrent expenditure".

It also noted that Swaziland's financial sector showed "early signs of vulnerability" and that "while banks in Swaziland still remain adequately capitalised and hold excess liquidity positions, there are possible risks to non-bank financial institutions".

This renewed call to reduce the wage bill will probably anger labour movements that, over the past 18 months, staged mass strike action in fierce resistance to government attempts to freeze salaries and slash jobs.

Fiscal transparency
IMF mission chief Joannes Mongardini acknowledged the sensitivities, but said: "These cuts will require sacrifices by all segments of Swazi society, but the basic needs of the most vulnerable should be protected as far as possible."

He urged the government to "protect pro-poor spending" and called for more "fiscal transparency" and that "all expenditures are channelled through appropriate budgetary procedures".

Swaziland has come under fire for how it manages its money and how much is spent on ruling monarch King Mswati III and his 13 wives while two-thirds of the country lives in poverty, hundreds of thousands of people rely on food aid and one in four adults has HIV, the highest prevalence rate in the world.

Mongardini, who noted that  Swaziland's growth had been weaker over the past 10 years than in other Sacu countries, said: "A poor business climate and the lack of competitiveness are key obstacles to attaining higher sustainable growth and creating jobs."

He said improving access to modern financing through land-tenure reform and launching an international tender for a second cellphone operator, along with privatising some state assets, would boost the country's economic performance.

The call for a second cellphone operator comes on the back of the long-running controversy surrounding the switch-off of a second mobile operator provided by the parastatal Swaziland Posts and Telecommunications Corporation.

MTN Swaziland, whose shareholders are widely reported to include Mswati and Prime Minister Barnabas Sibusiso Dlamini, successfully took the corporation to court to protect its monopoly, citing the violation of a joint-venture agreement signed by the state firm.

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