On December 9, 2015, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Swaziland.
Swaziland’s growth has been recovering since the 2010‒11 fiscal crisis, albeit at a slower pace recently. Growth recovery following the fiscal crisis was broadly supported by the manufacturing and service sectors. In 2015, however, growth is expected to slow, owing to adverse weather conditions and a slowdown in tourism and transport sectors. Swaziland continues to face significant development challenges, with high unemployment and poverty, and prevalence of HIV. Inflation has stayed modest (4.5 percent in September 2015), reflecting low international commodity prices.
Fiscal policy has become expansionary in recent years. Domestic revenue collection improved with stepped-up administration efforts. Expenditures expanded even further since the crisis, owing to increased recurrent spending (with fast growth in public sector wages) and a revival of capital expenditures. Subsequently, after running surplus for two years, the fiscal balance turned into a deficit in 2014/15. The deficit is expected to further increase in 2015/16 to 5 percent of GDP due to lower Southern African Customs Union (SACU) revenues, wage adjustments, and the supplementary budget. As a result, public debt is projected to grow fast in 2015, with heavy reliance on short-term debt creating high rollover risks.
While international reserves have strengthened since the crisis, they have not reached an adequate level. A current account surplus was recorded in 2014, supported by robust SACU revenues and exports (e.g., wood pulp, textile); there were financial account outflows in light of limited domestic investment opportunities. International reserves stayed at 3½ months of imports in September 2015, below the authorities’ medium-term target of 5–7 months of imports.
Swaziland’s growth outlook is projected to remain subdued over the medium term, while it is clouded with downside risks. Growth is expected to slow in 2016/17, followed by a modest recovery in the following years. SACU revenues are expected to decline markedly in 2016/17, putting pressures on fiscal and external balance. Furthermore, tighter or more volatile global financial conditions and weaker growth in South Africa could have negative spillovers to Swaziland. The recent weakening of the South African economy, together with the expected revision to the revenue sharing formula, point to downside risks for SACU revenues.
Executive Board Assessment2
Executive Directors welcomed Swaziland’s recovery since the 2010‒11 fiscal crisis, but they also stressed that significant challenges remain, including a prospective decline in the revenues from the Southern African Custom Union (SACU), a weakening regional outlook, heavy reliance on short-term financing, and large development needs reflected in high unemployment and poverty and the continued prevalence of HIV. In light of the significant downside risks to fiscal and external sustainability, Directors urged the authorities to substantially improve their policy performance to promote macroeconomic and financial stability, rebuild the economy’s resilience to shocks, and boost inclusive growth.
Directors welcomed the authorities’ intention to shift toward a tighter fiscal stance. They stressed that enhanced fiscal consolidation is needed over the medium term to ensure fiscal and debt sustainability, while ensuring that spending for critical social and development is safeguarded. Directors encouraged the authorities to contain recurrent expenditure, in particular the wage bill, and strengthen public financial and investment management and domestic revenue collection, while enhancing the international reserves buffer toward the medium-term target of 5‒7 months of imports.
Directors called for further efforts to ensure financial sector stability, in light of growing vulnerabilities and risks. They encouraged strengthening financial sector supervision and regulation, with a particular emphasis on the nonbank financial institutions. Directors commended efforts to enhance financial sector development and promote financial inclusion and access to credit.
Directors welcomed the authorities’ intention to tackle the substantial social and development challenges, and encouraged stronger efforts to promote more inclusive growth through greater private sector development. Directors urged the authorities to promote export diversification, enhance access to financing, and improve the business climate, while the loss of trade preferences from the United States and prospectively from the European Union underlines the importance of enhancing broader economic diversification and competitiveness.
| Swaziland: Selected Economic Indicators, 2013–20 |
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2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
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|
Prel. |
Prel. |
Proj.4 |
Proj.4 |
Proj.4 |
Proj.4 |
Proj.4 |
Proj.4 |
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(Percentage changes; unless otherwise indicated) |
|
National account and prices |
|
|
|
|
|
|
|
|
|
GDP at constant prices |
2.9 |
2.5 |
1.7 |
0.8 |
1.1 |
1.3 |
1.2 |
1.2 |
|
GDP deflator |
6.1 |
6.1 |
5.8 |
5.0 |
4.8 |
4.9 |
5.1 |
5.0 |
|
GDP at market prices (Emalangeni billions) |
44.1 |
47.9 |
51.5 |
54.5 |
57.8 |
61.4 |
65.3 |
69.4 |
|
Consumer prices (average) |
5.6 |
5.7 |
5.0 |
6.5 |
5.8 |
5.8 |
5.8 |
5.8 |
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|
|
|
|
|
|
|
External sector |
|
|
|
|
|
|
|
|
|
Average exchange rate (local currency per US$) |
9.7 |
10.8 |
… |
… |
… |
… |
… |
… |
|
Nominal exchange rate change (– = depreciation) 1 |
7.3 |
5.4 |
… |
… |
… |
… |
… |
… |
|
Real effective exchange rate (– = depreciation) 1 |
5.1 |
5.2 |
… |
… |
… |
… |
… |
… |
|
Gross international reserves |
|
|
|
|
|
|
|
|
|
(months of imports) |
3.7 |
3.5 |
3.6 |
3.3 |
3.2 |
3.2 |
3.2 |
3.1 |
|
(percent of GDP) |
18.3 |
16.7 |
16.0 |
14.8 |
14.4 |
14.3 |
14.1 |
13.6 |
|
(percent of reserve money) |
423 |
424 |
412 |
384 |
380 |
386 |
389 |
382 |
|
Gross reserves minus reserve money |
|
|
|
|
|
|
|
|
|
(percent of deposits) |
57.4 |
55.0 |
53.6 |
48.4 |
47.4 |
47.8 |
47.7 |
46.0 |
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|
Money and credit |
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|
|
|
|
|
|
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|
Domestic credit to the private sector |
20.2 |
9.8 |
6.5 |
5.3 |
4.7 |
4.9 |
4.8 |
4.8 |
|
Reserve money |
6.0 |
-0.8 |
6.3 |
4.5 |
4.2 |
4.4 |
4.3 |
4.2 |
|
M2 |
15.9 |
3.9 |
7.1 |
5.4 |
5.0 |
5.5 |
5.5 |
5.5 |
|
Interest rate (percent) 2 |
5.0 |
5.0 |
… |
… |
… |
… |
… |
… |
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|
|
|
|
|
|
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|
(Percent of GDP) |
|
National accounts |
|
|
|
|
|
|
|
|
|
Gross capital formation |
7.6 |
9.2 |
10.9 |
7.8 |
6.4 |
6.1 |
6.0 |
5.7 |
|
Government |
3.6 |
5.2 |
5.6 |
3.8 |
3.1 |
3.0 |
3.1 |
3.0 |
|
Private |
4.0 |
4.0 |
5.3 |
4.0 |
3.3 |
3.1 |
2.9 |
2.7 |
|
National savings |
12.7 |
12.1 |
11.7 |
6.6 |
6.5 |
7.0 |
6.8 |
6.4 |
|
Government |
6.5 |
7.4 |
4.3 |
-0.2 |
-0.1 |
0.6 |
0.7 |
0.6 |
|
Private |
6.2 |
4.6 |
7.4 |
6.8 |
6.6 |
6.4 |
6.1 |
5.8 |
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External sector |
|
|
|
|
|
|
|
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|
Current account balance |
|
|
|
|
|
|
|
|
|
(including official transfers) |
5.1 |
2.9 |
0.7 |
-1.2 |
0.1 |
0.8 |
0.8 |
0.6 |
|
(excluding official transfers) |
-12.8 |
-13.5 |
-13.3 |
-10.8 |
-9.5 |
-9.5 |
-9.5 |
-9.6 |
|
External public debt |
7.5 |
7.3 |
7.8 |
8.4 |
8.6 |
8.5 |
8.4 |
8.3 |
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|
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|
Central government fiscal operations 3 |
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|
|
|
|
|
|
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|
Overall balance |
0.7 |
-1.2 |
-5.0 |
-5.9 |
-4.3 |
-3.8 |
-3.9 |
-3.9 |
|
Total revenue and grants |
28.7 |
30.1 |
27.8 |
22.9 |
24.6 |
25.1 |
25.0 |
25.0 |
|
Total expenditure |
28.0 |
31.3 |
32.8 |
28.9 |
28.8 |
28.9 |
28.9 |
28.9 |
|
Public debt, gross |
14.8 |
13.7 |
17.4 |
20.2 |
21.8 |
24.0 |
26.4 |
28.8 |
|
Public debt, net |
3.3 |
2.9 |
8.2 |
13.7 |
17.2 |
20.0 |
22.7 |
25.2 |
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Memorandum item: |
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Population (in million) |
1.1 |
1.1 |
1.1 |
1.1 |
1.1 |
1.2 |
1.2 |
1.2 |
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|
Sources: Swazi authorities; and IMF staff estimates and projections. |
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1 IMF Information Notice System trade-weighted; end of period. |
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2 12-month time deposits rate. |
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3 Fiscal year data (fiscal years run from April 1 to March 31). |
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4 Staff estimates based on the baseline scenario. |
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| Swaziland: Selected Economic Indicators, 2013–20 |
| |
|
|
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
|
|
Prel. |
Prel. |
Proj.4 |
Proj.4 |
Proj.4 |
Proj.4 |
Proj.4 |
Proj.4 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
(Percentage changes; unless otherwise indicated) |
|
National account and prices |
|
|
|
|
|
|
|
|
|
GDP at constant prices |
2.9 |
2.5 |
1.7 |
0.8 |
1.1 |
1.3 |
1.2 |
1.2 |
|
GDP deflator |
6.1 |
6.1 |
5.8 |
5.0 |
4.8 |
4.9 |
5.1 |
5.0 |
|
GDP at market prices (Emalangeni billions) |
44.1 |
47.9 |
51.5 |
54.5 |
57.8 |
61.4 |
65.3 |
69.4 |
|
Consumer prices (average) |
5.6 |
5.7 |
5.0 |
6.5 |
5.8 |
5.8 |
5.8 |
5.8 |
|
|
|
|
|
|
|
|
|
|
|
External sector |
|
|
|
|
|
|
|
|
|
Average exchange rate (local currency per US$) |
9.7 |
10.8 |
… |
… |
… |
… |
… |
… |
|
Nominal exchange rate change (– = depreciation) 1 |
7.3 |
5.4 |
… |
… |
… |
… |
… |
… |
|
Real effective exchange rate (– = depreciation) 1 |
5.1 |
5.2 |
… |
… |
… |
… |
… |
… |
|
Gross international reserves |
|
|
|
|
|
|
|
|
|
(months of imports) |
3.7 |
3.5 |
3.6 |
3.3 |
3.2 |
3.2 |
3.2 |
3.1 |
|
(percent of GDP) |
18.3 |
16.7 |
16.0 |
14.8 |
14.4 |
14.3 |
14.1 |
13.6 |
|
(percent of reserve money) |
423 |
424 |
412 |
384 |
380 |
386 |
389 |
382 |
|
Gross reserves minus reserve money |
|
|
|
|
|
|
|
|
|
(percent of deposits) |
57.4 |
55.0 |
53.6 |
48.4 |
47.4 |
47.8 |
47.7 |
46.0 |
|
|
|
|
|
|
|
|
|
|
|
Money and credit |
|
|
|
|
|
|
|
|
|
Domestic credit to the private sector |
20.2 |
9.8 |
6.5 |
5.3 |
4.7 |
4.9 |
4.8 |
4.8 |
|
Reserve money |
6.0 |
-0.8 |
6.3 |
4.5 |
4.2 |
4.4 |
4.3 |
4.2 |
|
M2 |
15.9 |
3.9 |
7.1 |
5.4 |
5.0 |
5.5 |
5.5 |
5.5 |
|
Interest rate (percent) 2 |
5.0 |
5.0 |
… |
… |
… |
… |
… |
… |
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|
|
|
|
|
|
|
|
|
(Percent of GDP) |
|
National accounts |
|
|
|
|
|
|
|
|
|
Gross capital formation |
7.6 |
9.2 |
10.9 |
7.8 |
6.4 |
6.1 |
6.0 |
5.7 |
|
Government |
3.6 |
5.2 |
5.6 |
3.8 |
3.1 |
3.0 |
3.1 |
3.0 |
|
Private |
4.0 |
4.0 |
5.3 |
4.0 |
3.3 |
3.1 |
2.9 |
2.7 |
|
National savings |
12.7 |
12.1 |
11.7 |
6.6 |
6.5 |
7.0 |
6.8 |
6.4 |
|
Government |
6.5 |
7.4 |
4.3 |
-0.2 |
-0.1 |
0.6 |
0.7 |
0.6 |
|
Private |
6.2 |
4.6 |
7.4 |
6.8 |
6.6 |
6.4 |
6.1 |
5.8 |
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|
|
|
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|
|
|
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External sector |
|
|
|
|
|
|
|
|
|
Current account balance |
|
|
|
|
|
|
|
|
|
(including official transfers) |
5.1 |
2.9 |
0.7 |
-1.2 |
0.1 |
0.8 |
0.8 |
0.6 |
|
(excluding official transfers) |
-12.8 |
-13.5 |
-13.3 |
-10.8 |
-9.5 |
-9.5 |
-9.5 |
-9.6 |
|
External public debt |
7.5 |
7.3 |
7.8 |
8.4 |
8.6 |
8.5 |
8.4 |
8.3 |
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|
|
|
|
|
|
|
|
Central government fiscal operations 3 |
|
|
|
|
|
|
|
|
|
Overall balance |
0.7 |
-1.2 |
-5.0 |
-5.9 |
-4.3 |
-3.8 |
-3.9 |
-3.9 |
|
Total revenue and grants |
28.7 |
30.1 |
27.8 |
22.9 |
24.6 |
25.1 |
25.0 |
25.0 |
|
Total expenditure |
28.0 |
31.3 |
32.8 |
28.9 |
28.8 |
28.9 |
28.9 |
28.9 |
|
Public debt, gross |
14.8 |
13.7 |
17.4 |
20.2 |
21.8 |
24.0 |
26.4 |
28.8 |
|
Public debt, net |
3.3 |
2.9 |
8.2 |
13.7 |
17.2 |
20.0 |
22.7 |
25.2 |
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|
|
|
|
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Memorandum item: |
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|
|
|
|
|
|
|
|
Population (in million) |
1.1 |
1.1 |
1.1 |
1.1 |
1.1 |
1.2 |
1.2 |
1.2 |
| |
|
Sources: Swazi authorities; and IMF staff estimates and projections. |
|
|
|
1 IMF Information Notice System trade-weighted; end of period. |
|
|
|
2 12-month time deposits rate. |
|
|
|
|
|
|
|
|
|
3 Fiscal year data (fiscal years run from April 1 to March 31). |
|
|
|
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4 Staff estimates based on the baseline scenario. |
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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.
2 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. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.
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