IMF Staff Completes 2017 Article IV Visit to Swaziland

June 19, 2017

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.
  • The IMF estimates 2016 growth to stagnate, with a muted recovery envisaged in 2017, as the weaker fiscal position weighs heavily on the outlook.
  • Significant fiscal adjustment is needed to ensure macroeconomic stability and debt sustainability.
  • Structural reforms to address the lack of skilled workers, simplify business regulations, and strengthen the institutional environment have the potential to boost investment and employment.

An International Monetary Fund (IMF) staff team led by Mr. Geremia Palomba visited Mbabane from June 7-19, 2017, to conduct the 2017 Article IV Consultation discussions with Swaziland.

At the conclusion of the visit, Mr. Palomba made the following statement:

“Swaziland faces a challenging economic environment. In 2016, a prolonged drought and a sharp decline in revenue from the Southern African Customs Union (SACU) severely hit the economy. An expansionary fiscal policy weakened the fiscal accounts and led to the accumulation of domestic arrears. Against this background, based on preliminary data, the IMF estimates 2016 growth to stagnate. A muted recovery is envisaged in 2017, as the weaker fiscal position weighs heavily on the outlook. Risks to this outlook are tilted to the downside and include further tightening in budget financing, volatile SACU revenue, lower demand for key exports, and tightened global monetary conditions.

“Swaziland’s key challenge going forward is to preserve macroeconomic stability against low SACU revenue and sustain growth to make inroads in reducing high unemployment and income inequality. The government and the Central Bank of Swaziland have taken some steps to contain the fiscal deficit and counter the still high inflation. However, heightened fiscal and external vulnerabilities call for additional actions.

“In light of the macroeconomic outlook, significant fiscal adjustment is needed, starting in fiscal 2017/18, to ensure macroeconomic stability and debt sustainability. Policies need to be carefully designed to address the main sources of recent fiscal deterioration and include both expenditure and revenue measures that can support long-term growth. Strengthening public financial management and improving the management of public entities outside the central government is critical to implement fiscal adjustment plans. To this end, the IMF team welcomes the authorities’ intention to consider additional actions to contain the 2017/18 fiscal deficit within the original budget limit (8.2 percent of GDP) and start fiscal adjustment in next year budget.

“The financial sector remains sound and the authorities are taking steps to monitor and manage possible risks and advance key financial sector reforms. Heightened monitoring and supervision of financial sector risks is warranted given the links with the government, the banking sector’s vulnerabilities and relatively high household debt, and complex and extensive linkages across financial institutions.

“The government has taken actions on various fronts to support growth, tackle high unemployment and reduce poverty and income inequality. Structural reforms to address the lack of skilled workers, better align wage and productivity dynamics, simplify business regulations and strengthen the institutional environment have the potential to significantly boost investment and employment. Focusing reform efforts in this direction appears the most promising way to deliver stronger more inclusive growth.

“The team met with Minister of Finance, Martin Dlamini, Minister of Public Service, Owen Nxumalo, Central Bank of Swaziland Governor Majozi Sithole, other senior officials, and financial market, business and union representatives. The team would like to express its gratitude to the authorities and their staff for the productive and open discussions.”

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