## IMF Survey: Swaziland Uses IMF Monitoring Program to Fight Fiscal Crisis

_IMF News, April 8, 2011_

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## Bibliographic details
- Authors: Olivier Basdevant IMF African Department April
- Published: April 8, 2011

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### Program overview
- IMF management approved a Staff-Monitored Program for Swaziland on April 4, 2011 to encourage fiscal adjustment while safeguarding spending on education and health.
- The program entails IMF staff scrutiny of the authorities’ policies but does not include formal backing by the IMF Executive Board or any financial support.
- The agreement monitors implementation of the Government of Swaziland’s economic and financial program during a specified period.

### Fiscal situation and risks
- Overall budget deficit estimated around 13 percent of GDP for the 2010/11 fiscal year ending on March 31, 2011.
- Swaziland faces a liquidity crisis (short-term financing constraints) rather than a solvency crisis, with a debt-to-GDP ratio around 20 percent of GDP.
- Risk that the liquidity crisis could quickly turn into a solvency crisis if fiscal adjustment is not implemented promptly, as adjustment will take time and could imply a growing debt-to-GDP ratio over the coming years.
- Heavy dependence on Southern African Customs Union transfers, which accounted for 63 percent of total revenues in 2009/10; these transfers fell by about two-thirds (11 percent of GDP) following the global financial crisis and are not expected to recover to pre-crisis levels.

### Fiscal roadmap and public financial management reforms
- Swazi authorities adopted a Fiscal Adjustment Roadmap in late 2010 focused on restoring fiscal sustainability.
- Short-term measures in the roadmap include tax increases and a hiring and wage freeze.
- Medium-term measures emphasize strengthening Finance Ministry functions: public financial management, expenditure policy, tax policy, and revenue administration.
- The package proposes reducing the civil service by 20 percent through an enhanced voluntary early retirement scheme.
- The roadmap was submitted for scrutiny under the IMF Staff-Monitored Program; approval does not represent endorsement by the IMF Executive Board nor involve IMF financing.

### Expenditure and revenue pressures
- Wage bill described as one of the largest in sub-Saharan Africa, at around 18 percent of GDP in FY2010/11.
- Budget weaknesses have led to off-budget expenditures subsequently regularized by supplementary budgets.
- Specific budgetary pressures in 2010/11:
  - A 4½ percent unbudgeted wage increase granted to civil servants and politicians in June 2010.
  - Additional expenditure of around $50 million to finance overruns for a new airport project.

### Economic projections and macroeconomic effects
- Large fiscal adjustment in 2011 and structural impediments are projected to dampen real GDP expansion to about ½ percent in 2011.
- Consumer price inflation projected to accelerate to about 8 percent in 2011 from 6¼ percent in 2010, reflecting higher domestic taxes and levies, and increases in international food and fuel prices.
- Mirroring the sharp fiscal adjustment, the current account is expected to improve significantly.

### Pro-poor spending and social protection priorities
- Key priority: protect pro-poor spending (education and health) while consolidating public finances.
- Rationale: Swaziland has the highest incidence of HIV/AIDS and tuberculosis in the world, skewed income distribution, and pervasive poverty; protecting education and health is essential to progress towards halving poverty by 2015.
- Under the Staff-Monitored Program, IMF staff recommended additional upfront measures to strengthen the credibility of the fiscal roadmap and to assist authorities in raising adequate financing for the budget.

### Recommended and adopted measures
- IMF staff recommended nominal wage cuts for higher-paid civil servants, with smaller reductions for lower-paid civil servants, to reduce the size of the wage bill.
- Government commitments and actions:
  - Committed to cut the salaries of cabinet ministers by 10 percent.
  - Negotiations underway with parliamentarians and trade unions to achieve a 5 percent cut in the overall wage bill.
- These cuts intended to allow continued financing of pensions for the elderly, school programs for orphaned children, and medicines for people infected with HIV/AIDS.

*Source: IMF Survey: Swaziland Uses IMF Monitoring Program to Fight Fiscal Crisis (IMF), April 8, 2011*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [Hear the podcast](https://www.imf.org/external/pubs/ft/survey/so/pvcast.aspx)
- [Watch the video](https://www.imf.org/external/mmedia/view.aspx?vid=895425642001)
- [Swaziland and the IMF](https://www.imf.org/external/country/swz/index.htm)
- [Africa’s recovery momentum](https://www.imf.org/external/pubs/ft/survey/so/2011/CAR012411A.htm)
- [Africa investment set to rise](https://www.imf.org/external/pubs/ft/survey/so/2011/CAR011211A.htm)
- [Africa set for growth](https://www.imf.org/external/pubs/ft/survey/so/2010/CAR102510A.htm)
- [Blog: Manage resources better](http://blog-imfdirect.imf.org/2010/12/15/policies-to-manage-natural-resources/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar040811a_