Press Release No. 10/424

Press Release No. 10/424
November 10, 2010

A mission from the International Monetary Fund (IMF), led by Joannes Mongardini, visited Mbabane during October 27-November 10, 2010. The mission held discussions on a staff-monitored program and conducted the 2010 Article IV consultation discussions.¹ The mission met with the Prime Minister, His Excellency Dr. Barnabas Sibusiso Dlamini, the Minister of Finance, Hon. Majozi Sithole, the Minister of Economic Planning and Development, H.R.H. Prince Hlangusemphi, the Governor of the Central Bank, Mr. Martin Dlamini, and other senior officials. The mission briefed the full government in a cabinet session on November 9, 2010. It also held fruitful discussions with donors, representatives of the private sector, and labor unions.

At the end of the mission, Mr. Mongardini issued the following statement:

“The economy of the Kingdom of Swaziland is facing substantial fiscal challenges. Notwithstanding a likely pickup in real GDP growth to 2 percent in 2010 and moderating inflation, the central government deficit, at current trends, is expected to reach 16.0 percent of GDP in fiscal year 2010/11, compared with 7.1 percent of GDP in 2009/10. The widening of the fiscal deficit is driven mainly by a large shortfall in revenue transfers (11.0 percent of GDP) from the Southern Africa Customs Union (SACU) and a 4.5 percent wage increase granted to civil servants and politicians earlier this year, which has contributed to the largest wage bill (as a share of GDP) in Sub-Saharan Africa. Correspondingly, the external current account deficit is expected to widen to 18.5 percent of GDP in 2010, which is draining the gross international reserves of the Central Bank of Swaziland.”

The authorities put together a Fiscal Adjustment Roadmap (FAR) in October 2010 to address these fiscal challenges and reduce the fiscal deficit to less than 3 percent of GDP by 2014/15. The FAR envisages measures to increase revenue through improvements in tax administration and tax policy changes, and reduce non-priority expenditure, including the voluntary retrenchment of 7,000 civil servants. It also proposes measures to improve external competitiveness through structural measures aimed at reducing the cost of doing business, enhance growth, and continue the fight against poverty and HIV/AIDS. The mission welcomed the objectives of the FAR, and called for urgent revenue and expenditure measures in order to start the adjustment process already this fiscal year, which would reduce pressures on the government treasury and the gross international reserves of the central bank. It stressed the need to protect priority spending from the envisaged fiscal adjustment, including on education and health, to continue to fight poverty and HIV/AIDS.”

The authorities have requested Fund staff to monitor the authorities’ policies through a Staff-Monitored Program. In this context, broad understandings have been reached on the authorities’ memorandum of economic and financial policies that could form the basis for approval of the Staff-Monitored Program by the IMF Managing Director later this year.”

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¹ Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.