Kingdom of Swaziland: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Kingdom of Swaziland

IMF Staff Country Reports, September 11, 2017

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Canonical URL: Kingdom of Swaziland: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Kingdom of Swaziland

Macroeconomic conditions have recently deteriorated in Swaziland.
In 2016, two shocks severely hit the economy: a prolonged drought and a sharp decline in South African Customs Union (SACU) receipts.
An expansionary fiscal policy in 2016 worsened fiscal and external balances.
Growth in 2016 stagnated as agricultural productions declined.
Headline inflation increased sharply in 2016, mostly owing to rising food prices.
Fiscal policy remains on an expansionary course, while the monetary stance has tightened.
Despite a pickup in SACU revenue, the 2017 budget envisages a continuation of large fiscal deficits and further increase in public debt.

Shocks affecting the economy:
- Prolonged drought in 2016.
- Sharp decline in SACU receipts in 2016.
Real economy and prices:
- Growth stagnation in 2016 due to declining agricultural production.
- Sharp increase in headline inflation in 2016, driven mostly by food prices.
Policy stances:
- Fiscal policy: expansionary through 2016 and into the 2017 budget.
- Monetary policy: tightened stance as of the report.

Fiscal risks:
- Large fiscal deficits are projected to continue under the 2017 budget.
- Further increases in public debt are envisaged.
External vulnerabilities:
- Declines in SACU receipts materially affect the external position and fiscal balances.
Recommended policy focus areas (as implied by report findings):
- Address expansionary fiscal stance to stabilize fiscal and external balances.
- Monitor and manage public debt trajectory given projected increases.
- Coordinate monetary policy tightening with fiscal consolidation to contain inflationary pressures, especially from food prices.
- Build resilience to climate-related shocks (prolonged drought) affecting agricultural output.