{ "title": "IMF Staff Completes 2024 Article IV Mission to Kingdom of Eswatini", "publication": "IMF News, July 24, 2024", "sourceUrl": "https://www.imf.org/en/news/articles/2024/07/24/pr-24288-eswatini-imf-staff-completes-2024-article-iv-mission", "canonical": "https://www.imf.org/en/news/articles/2024/07/24/pr-24288-eswatini-imf-staff-completes-2024-article-iv-mission", "overlayPath": "/en/news/articles/2024/07/24/pr-24288-eswatini-imf-staff-completes-2024-article-iv-mission/index.md", "summary": "An International Monetary Fund (IMF) staff team, led by Mr. Jaroslaw Wieczorek, IMF mission chief for Eswatini, visited Mbabane during July 11‒24, 2024, to conduct discussions for the 2024 Article IV Consultation with Eswatini.", "publishDate": "2024-07-24", "sections": [ { "heading": "Mission overview and context", "content": "- IMF staff team led by Mr. Jaroslaw Wieczorek visited Mbabane during July 11‒24, 2024 to conduct discussions for the 2024 Article IV Consultation with Eswatini.\n- End-of-mission statement conveys preliminary findings of IMF staff; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.\n- Staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision." }, { "heading": "Growth and external sector", "content": "- Growth is estimated to have reached 4.9 percent in 2023.\n- Growth drivers in 2023: exports of sugar and soft drink concentrates, tourism, and the communication sector.\n- Growth is poised to remain in the 4.5 to 5.0 percent range in 2024, before returning to its historical average of about 2.5 percent in the medium term.\n- High capital investment, energy projects, and expansion in the mining sector can spur growth, but concrete measures and a well-defined investment program to raise potential growth need to be articulated.\n- External current account:\n - Turned from a deficit of 2.7 percent of GDP in 2022 to a surplus of 2.2 percent of GDP in 2023.\n - The surplus is expected to persist in 2024 thanks to high SACU receipts.\n - Foreign reserves are accumulating but not commensurately, partly because banks and nonbanks increased their net foreign asset positions and exporters were allowed to keep their proceeds abroad.\n - The external position is expected largely to normalize once the SACU receipts revert to the baseline in the medium run.\n- Recommendation: Strengthen buffers to manage SACU revenue volatility and implement structural reforms to improve external competitiveness." }, { "heading": "Inflation and cost of living", "content": "- Average 12-month inflation rose to 4.4 percent in June.\n- CPI inflation rose to 4.4 percent y/y in June 2024 from 3.5 percent in September 2023.\n- Contributors to the June 2024 inflation:\n - Housing, fuel, and power: 1.9 percentage points.\n - Food: 0.9 percentage points.\n- Core inflation ran at 3.4 percent.\n- Inflation in Eswatini has been lower than in South Africa; in May 2024 the difference exceeded one percentage point, partly due to administrative prices on utilities and staple goods.\n- Inflation is expected to rise further in the wake of electricity tariffs increases before easing in line with global trends.\n- The increased cost of living has highlighted the importance of strengthening the social safety net." }, { "heading": "Fiscal position, financing, and public debt", "content": "- Record high SACU revenues have significantly improved the fiscal position.\n- Fiscal deficit expected to narrow to 1.5 percent of GDP in FY24/25.\n- Risks to the fiscal position: lower SACU receipts in the future, spending pressures, and slowing growth.\n- Staff’s medium-term scenario projects the fiscal deficit to widen; greater expenditure restraint will be needed to cap the deficit at 3.5 percent of GDP starting in 2025/26 to stabilize public debt at around 40 percent of GDP, as is the government’s intention.\n- Fiscal stance: broadly appropriate, but some key expenditure areas need attention.\n- Recommendations on public spending and staffing:\n - End the public sector hiring freeze, accompanied by a rationalization of the public sector to increase productivity and adequately staff key positions, especially in statistics and delivery of social services.\n - Spending on health and education is critical, but proper spending controls and increased efficiency must accompany additional funding.\n- Fiscal financing concerns:\n - Shortfalls in net issuance of treasury bills and bonds are contributing to cash management challenges and domestic payment arrears.\n - In May 2024 the government raised 400 million rand on the Johannesburg Stock Exchange; further financing is needed, although costly in the current high interest rate environment.\n- Positive fiscal management developments:\n - Digitalization efforts in government accounting systems are important steps for improving public financial management.\n - Work on a well-defined medium-term fiscal framework is advanced.\n - Priority: ensure new systems align with international standards for chart of accounts and Government Financial Statistics." }, { "heading": "Monetary policy and financial sector", "content": "- Policy rate is at 7.5 percent, which is 75 basis points lower than that of the South African Reserve Bank (SARB).\n- Prolonged deviation from the SARB policy rate could generate risks, especially as the current account is expected to weaken.\n- Despite the interest rate differential, credit growth lags nominal GDP growth due to limited domestic investment opportunities.\n- Recommendation: Align the Central Bank of Eswatini (CBE)’s rate with the SARB rate as the first best option given concerns about foreign reserve adequacy.\n- Financial system:\n - Buffers are being rebuilt after the pandemic, but asset quality remains a concern.\n - Banks are wary of rising NPLs and diminished credibility of the government; they maintain a large excess reserve position at the CBE in the remunerated overnight call window.\n - Orderly workouts can alleviate stress and reduce risks." }, { "heading": "Labor market, poverty, and social policies", "content": "- His Majesty the King recognized high poverty and unemployment as a national emergency; job creation was a focus of the FY24/25 budget.\n- Unemployment rates:\n - Overall unemployment: 35.4 percent in 2023.\n - Youth unemployment: 48.7 percent in 2023.\n- Causes: dearth of employment opportunities and large skill gaps and mismatches.\n- Current initiatives to address unemployment have yet to yield significant results.\n- Policy recommendations:\n - Support private sector development to attract foreign direct investment to address bottlenecks in the power sector.\n - Promote green financing to address climate change vulnerabilities.\n - Support long-term growth with entrepreneurship, business facilitation, and education policies." }, { "heading": "Structural reforms and governance", "content": "- Need for deep structural reforms to boost growth and tackle social issues:\n - Strengthen efficiency of public investment.\n - Increase support for entrepreneurship.\n - Improve governance.\n - Revamp education policy to address skills mismatches and tackle structural unemployment.\n- Governance improvements:\n - Anti-Corruption Commission appears to have gained vigor.\n - Progress on AML/CFT with the recently completed National Risk Assessment.\n - More work needed to address key shortcomings, resource constraints, and alter negative perceptions to strengthen the business climate and attract foreign direct investment." }, { "heading": "Data, statistical capacity, and digitalization", "content": "- Increasing resources for data producing offices is key (The Central Statistics Office, Treasury, and Ministry of Labor & Social Security).\n- Digitalization can help improve data collection.\n- Ensuring new government accounting systems conform with international standards for chart of accounts and Government Financial Statistics is a priority.\n\nIMF Staff Completes 2024 Article IV Mission to Kingdom of Eswatini — July 24, 2024\n\n---\n\n\n References\n\n- Kingdom of Eswatini and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/07/24/pr-24288-eswatini-imf-staff-completes-2024-article-iv-mission" } ], "bullets": [ "[Markdown version](/en/news/articles/2024/07/24/pr-24288-eswatini-imf-staff-completes-2024-article-iv-mission/index.md)", "[Structured JSON version](/en/news/articles/2024/07/24/pr-24288-eswatini-imf-staff-completes-2024-article-iv-mission/index.json)", "[Bundle manifest](/en/news/articles/2024/07/24/pr-24288-eswatini-imf-staff-completes-2024-article-iv-mission/bundle-manifest.json)", "Published: July 24, 2024", "IMF staff team led by Mr. Jaroslaw Wieczorek visited Mbabane during July 11‒24, 2024 to conduct discussions for the 2024 Article IV Consultation with Eswatini.", "End-of-mission statement conveys preliminary findings of IMF staff; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.", "Staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.", "Growth is estimated to have reached 4.9 percent in 2023.", "Growth drivers in 2023: exports of sugar and soft drink concentrates, tourism, and the communication sector.", "Growth is poised to remain in the 4.5 to 5.0 percent range in 2024, before returning to its historical average of about 2.5 percent in the medium term.", "High capital investment, energy projects, and expansion in the mining sector can spur growth, but concrete measures and a well-defined investment program to raise potential growth need to be articulated.", "External current account:", "Recommendation: Strengthen buffers to manage SACU revenue volatility and implement structural reforms to improve external competitiveness.", "Average 12-month inflation rose to 4.4 percent in June.", "CPI inflation rose to 4.4 percent y/y in June 2024 from 3.5 percent in September 2023.", "Contributors to the June 2024 inflation:", "Core inflation ran at 3.4 percent.", "Inflation in Eswatini has been lower than in South Africa; in May 2024 the difference exceeded one percentage point, partly due to administrative prices on utilities and staple goods.", "Inflation is expected to rise further in the wake of electricity tariffs increases before easing in line with global trends.", "The increased cost of living has highlighted the importance of strengthening the social safety net.", "Record high SACU revenues have significantly improved the fiscal position.", "Fiscal deficit expected to narrow to 1.5 percent of GDP in FY24/25.", "Risks to the fiscal position: lower SACU receipts in the future, spending pressures, and slowing growth.", "Staff’s medium-term scenario projects the fiscal deficit to widen; greater expenditure restraint will be needed to cap the deficit at 3.5 percent of GDP starting in 2025/26 to stabilize public debt at around 40 percent of GDP, as is the government’s intention.", "Fiscal stance: broadly appropriate, but some key expenditure areas need attention.", "Recommendations on public spending and staffing:", "Fiscal financing concerns:", "Positive fiscal management developments:", "Policy rate is at 7.5 percent, which is 75 basis points lower than that of the South African Reserve Bank (SARB).", "Prolonged deviation from the SARB policy rate could generate risks, especially as the current account is expected to weaken.", "Despite the interest rate differential, credit growth lags nominal GDP growth due to limited domestic investment opportunities.", "Recommendation: Align the Central Bank of Eswatini (CBE)’s rate with the SARB rate as the first best option given concerns about foreign reserve adequacy.", "Financial system:", "His Majesty the King recognized high poverty and unemployment as a national emergency; job creation was a focus of the FY24/25 budget.", "Unemployment rates:", "Causes: dearth of employment opportunities and large skill gaps and mismatches.", "Current initiatives to address unemployment have yet to yield significant results.", "Policy recommendations:", "Need for deep structural reforms to boost growth and tackle social issues:", "Governance improvements:", "Increasing resources for data producing offices is key (The Central Statistics Office, Treasury, and Ministry of Labor & Social Security).", "Digitalization can help improve data collection.", "Ensuring new government accounting systems conform with international standards for chart of accounts and Government Financial Statistics is a priority.", "[Kingdom of Eswatini and the IMF](http://www.imf.org/external/country/SWZ/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2024/07/24/pr-24288-eswatini-imf-staff-completes-2024-article-iv-mission/index.md", "json": "/en/news/articles/2024/07/24/pr-24288-eswatini-imf-staff-completes-2024-article-iv-mission/index.json", "bundleManifest": "/en/news/articles/2024/07/24/pr-24288-eswatini-imf-staff-completes-2024-article-iv-mission/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T03:13:06.451Z" }