Statement at the Conclusion of an IMF Article IV Mission to Swaziland

Press Release No. 11/415
November 16, 2011

A mission of the International Monetary Fund (IMF), led by Mr. Joannes Mongardini, visited Swaziland during November 2-16, 2011. The mission conducted the 2011 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 Governor of the Central Bank of Swaziland, Mr. Martin Dlamini; and other senior officials. It also held fruitful discussions with members of parliament, donors, trade unions, and representatives of the private sector. The Article IV consultation will conclude with the preparation of a staff report expected to be taken up by the IMF Executive Board on January 20, 2012.

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

“The fiscal crisis in Swaziland has reached a critical stage. Government revenue collections are insufficient to cover essential government expenditures, including the wage bill. More importantly, key social programs, like the fight against HIV/AIDS, free primary education, the support for orphaned and vulnerable children, and elderly grants, are being negatively affected. The amount of unpaid government bills (the so-called domestic arrears) has reached an estimated E 1.5 billion (5.3 percent of gross domestic product—GDP) at end-September 2011. This is reducing private sector activity, with various enterprises dependent on government contracts having to lay off workers or shutting down. As a result, IMF staff projects real GDP growth to fall to 0.3 percent in 2011, notwithstanding higher export-led activity in agriculture and manufacturing. The fiscal crisis is also affecting the financial sector, with signs of liquidity pressures in commercial banks. Inflation remains moderate at about 6 percent at end-September 2011, while the gross official reserves of the central bank increased from E 3.7 billion at end-June 2011 to E 4.3 billion on November 11, 2011, equivalent to 2.4 months of import cover.

“The mission concurs with the authorities’ views that the government will continue to face severe liquidity constraints over the coming months. In this context, it welcomes the submission to parliament of a supplementary budget to cut expenditures by E 556 million (2 percent of GDP). The supplementary budget includes downward revisions in revenue projections and cuts in capital expenditures and goods and services, while regularizing earlier budgetary overruns in defense expenditures. As a result, the fiscal deficit for 2011/12 is expected to reach about 10 percent of GDP, compared with the target of 7.5 percent of GDP in the original budget. It is, however, the mission’s assessment that the supplementary budget is insufficient to align expenditures to available financing and that further cuts are needed, particularly on the wage bill. The mission also urges the government to protect education, health, and pro-poor spending from further cuts or additional arrears, and to strengthen commitment controls to avoid further expenditure overruns.

“The mission continues to share the authorities’ view that preserving the parity with the South African rand is a priority. In this context, it welcomes the government’s decision to stop borrowing from the central bank or reduce its deposits. The mission urges the government to repay the emergency credit line granted by the central bank earlier this year at the earliest opportunity. Moreover, it encourages the authorities to monitor closely the banking sector and to act swiftly to establish the new regulatory authority to supervise the nonbank financial institutions.

“The mission would like to thank the authorities for the frank and constructive discussions.”


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.



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