## IMF Executive Board Concludes 2024 Article IV Consultation with the Kingdom of Eswatini

_IMF News, September 30, 2024_

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## Bibliographic details
- Published: September 30, 2024

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### Overview
- Executive Board concluded the Article IV consultation on September 25, 2024 and endorsed the staff appraisal without a meeting on a lapse-of-time basis.
- Press Release No. 24/344.
- Growth in 2023 estimated at 4.9 percent of GDP; growth poised to remain in the 4.5 to 5 percent range in 2024.
- Inflation stable at 4.1 percent year on year in August 2024; expected to rise following electricity tariff increases before easing in line with global trends.
- Current account posted a surplus of 2.2 percent of GDP in 2023; official reserves equivalent to 2.2 months of imports at end-2023 were below adequacy metrics.
- Overall fiscal deficit narrowed to 1.5 percent of GDP in FY23/24 from 6.2 percent of GDP in FY22/23.
- Public debt below 40 percent of GDP; debt vulnerabilities described as moderate.
- Unemployment in 2023: overall 35.4 percent; youth 48.7 percent.

### Economic performance and projections
- 2023 real GDP growth: 4.9 percent; medium-term baseline growth expected to revert to 2.5 percent.
- Growth drivers in 2023: exports of sugar and soft drink concentrates, tourism, and the communication sector.
- Growth projection horizon: growth expected to slow while inflation is projected to decline throughout the 5-year projection horizon.
- SACU receipts projected to fall; authorities expected to exercise expenditure restraint to keep debt around 40 percent of GDP.
- Selected projections from the staff table:
  - Real GDP growth: 2021: 10.7; 2022: 0.5; 2023: 4.9; 2024: 4.6; 2025: 4.2; 2026: 3.4; 2027: 2.9; 2028: 2.7; 2029: 2.6.
  - Nominal GDP growth: 2021: 9.3; 2022: 14.3; 2023: 7.5; 2024: 8.0; 2025: 7.3; 2026: 6.9; 2027: 6.6.
  - Nominal GDP (billions of USD): 2021: 4.8; 2022: 5.1; 2023: 5.4; 2024: 5.7; 2025: 5.9; 2026: 6.2; 2027: 6.4.
  - Nominal GDP per capita (USD): 2021: 4,259; 2022: 4,162; 2023: 4,174; 2024: 4,375; 2025: 4,562; 2026: 4,726; 2027: 4,866; 2028: 5,015; 2029: 5,155.
  - GDP Deflator: 2021: -1.2; 2022: 8.8; 2023: 9.0; 2024: 2.8; 2025: 3.6; 2026: 3.8; 2027: 3.9; 2028: 4.1; 2029: 4.0.
  - Consumer prices (average): 2021: 3.7; 2022: 4.4.
  - Consumer prices (end of period): 2021: 3.5; 2022: 5.6; 2023: 4.3; 2024: 4.7.

### Fiscal developments and recommendations
- Fiscal outcomes:
  - Revenues (percent of GDP): 2021: 24.5; 2022: 23.2; 2023: 28.6; 2024: 29.1; 2025: 26.2; 2026: 25.8; 2027: 26.1; 2028: 26.0; 2029: 28.1.
  - Of which SACU receipts (percent of GDP): 2021: 8.7; 2022: 7.2; 2023: 12.9; 2024: 13.3; 2025: 9.9; 2026: 9.5; 2027: 10.0.
  - Expenditure (percent of GDP): 2021: 29.0; 2022: 29.4; 2023: 30.1; 2024: 30.8; 2025: 29.9; 2026: 29.3; 2027: 28.8; 2028: 28.5; 2029: 28.1.
  - Gross capital formation (percent of GDP): 2021: 11.4; 2022: 14.7; 2023: 14.9; 2024: 14.2; 2025: 13.7; 2026: 13.6; 2027: 13.8.
  - Public gross capital formation (percent of GDP): 2021: 6.8; 2022: 7.7; 2023: 7.1; 2024: 6.3.
  - Private gross capital formation (percent of GDP): 2021: 6.0; 2022: 7.4.
  - Primary balance (percent of GDP): 2021: -2.7; 2022: -4.1; 2023: 1.5; 2024: 1.2; 2025: -0.4; 2026: -0.1; 2027: 0.6; 2028: 0.8; 2029: 0.7.
  - Overall fiscal balance (percent of GDP): 2021: -4.5; 2022: -6.2; 2023: -1.5; 2024: -1.7; 2025: -3.7; 2026: -3.5; 2027: -2.6; 2028: -2.3; 2029: -2.1.
  - Public debt, gross (percent of GDP): 2021: 37.0; 2022: 40.7; 2023: 38.5; 2024: 40.1; 2025: 41.6; 2026: 41.4; 2027: 41.0.
- Fiscal assessment and guidance:
  - Fiscal position strengthened, meeting objectives of the 2020 fiscal adjustment plan.
  - Windfall SACU receipts increased by 3.6 percent of GDP between FY19/20 and FY23/24; expenditure restraint contributed 3.7 percent of GDP over the same period.
  - Primary fiscal balance in FY23/24 estimated at a surplus of 1.5 percent of GDP; public debt-to-GDP ratio brought under 40 percent of GDP.
  - Baseline envisages a temporary widening of overall fiscal deficit by 2 ppt of GDP in FY25/26 to accommodate the drop in SACU receipts; staff estimate this temporary widening adequate while steering the underlying fiscal position toward sustainability via a 1.7 ppt reduction in the structural deficit.
  - Recommendations:
    - Exercise expenditure restraint as SACU receipts decline.
    - Consider setting aside savings in stabilization ahead of SACU revenue decline where feasible.
    - Pursue other financing options, including from IFIs, to support public sector reforms and public investment.
    - Clear public arrears as soon as feasible and strengthen public financial management to reduce recurrence.
    - Ensure the budget process reflects realistic financing assumptions and includes a year-by-year plan to clear arrears with controls to prevent accumulation.

### External sector, reserves, and monetary policy
- External outcomes and risks:
  - Current account surplus: 2023: 2.2 percent of GDP; projected to strengthen in 2024 and weaken thereafter while remaining in surplus.
  - Reserves (percent of GDP): 2021: 12.7; 2022: 9.8; 2023: 11.0; 2024: 10.2; 2025: 10.4; 2026: 10.5; 2027: 10.1.
  - Reserves (in months of imports): 2021: 3.0; 2022: 2.4.
  - Imports of goods and services (millions of USD): 2021: 2,174; 2022: 2,285; 2023: 2,354; 2024: 2,615; 2025: 2,812; 2026: 3,069; 2027: 3,189; 2028: 3,407; 2029: 3,595.
  - Exports (percent of GDP): 2021: 42.6; 2022: 42.5; 2023: 41.8; 2024: 43.7; 2025: 44.6; 2026: 45.9; 2027: 46.3; 2028: 46.8; 2029: 47.3.
  - Imports (percent of GDP): 2021: 39.9; 2022: 38.4; 2023: 42.4; 2024: 44.8; 2025: 45.2; 2026: 47.0; 2027: 48.2.
- Policy guidance:
  - Better management of SACU revenues and structural reforms to bolster external competitiveness can support external position and reserve buffers.
  - Given the peg to the rand, the policy rate should be realigned to the South Africa Reserve Bank (SARB); in the absence of immediate inflationary pressures, this realignment can occur gradually.
  - Staff offer assistance to modernize liquidity management framework and strengthen financial sector surveillance, including AML/CFT aspects.

### Financial sector and legal framework
- The package of financial law amendments is intended to modernize the financial system.
- Before adoption by Parliament, amendments should be reviewed to ensure conformity with international standards; staff stand ready to assist.
- Financial sector technical priorities include modernizing liquidity management and strengthening financial sector surveillance and AML/CFT measures.

### Structural and social challenges
- Structural constraints to potential growth: poor business environment, weak governance, limited entrepreneurship, low financial literacy, and constrained credit to MSMEs.
- Governance concerns and corruption perceptions hinder foreign investment attractiveness.
- Social challenges:
  - Unemployment: 35.4 percent (2023); youth unemployment 48.7 percent (2023).
  - Poverty, food insecurity, inequality, and gender-based violence remain important social challenges; social indicators need updating.
  - Recommendations:
    - Improve public service delivery while ensuring fiscal sustainability.
    - End the hiring freeze to enable comprehensive civil service reform.
    - Support job creation and skill acquisition.
    - Introduce a limited and sustainable job loss insurance scheme (including on account of sickness and maternity) to strengthen the social safety net and enhance labor market efficiency.
    - Urgently expand social protection to alleviate poverty, prevent gender-based violence, and improve access to health and education services.

### Public financial management and data weaknesses
- Public financial management (PFM) status:
  - Authorities implementing IFMIS in the Ministry of Finance, moving to IPSAS in the Treasury, establishing an invoice register, and progressing on a medium-term fiscal framework.
  - Remaining shortfalls in expenditure controls (contributing to arrears), liquidity management, and debt management.
  - Medium-term fiscal framework needs full integration of fiscal operations, including financing assumptions and tracking interest cost implications, to enable debt sustainability assessment.
- Data and statistics:
  - Serious data weaknesses undermine policy monitoring and IMF surveillance.
  - Resource constraints affecting data collection and management at the CSO, Department of Labor, Ministry of ICT, the budget team, and debt management unit should be addressed as a high priority.

### Key contextual facts and indicators
- Population (2022, million): 1.2.
- Per-capita GDP (2022, USD): 4161.7.
- Quota (current, millions of SDR, percent of total): 11.7.
- Poverty (2016, percent of national poverty line): 58.9.
- Main exports: Beverages, Sugar, and Textiles.
- Key export markets: Republic of South Africa, Kenya, and Zimbabwe.
- Exchange rate indicators:
  - REER (percent, yoy): 2021: -4.6; 2022: -5.8.
  - Average exchange rate (emalangeni per USD): 2021: 14.8; 2022: 16.4; 2023: 18.5.
- Money and credit:
  - Broad money: 2021: 0.3; 2022: 5.8.
  - Credit to the private sector: 2021: 12.0; 2022: 9.6; 2023: 8.6.
  - 12-month time deposit rate (percent): 2021: 6.5.
- Balance of payments and external debt:
  - Financial account balance: 2021: 3.1; 2022: -1.6; 2023: 1.3; 2024: 2.1; 2025: 0.9.
  - Of which: FDI: 2021: -0.7; 2022: -1.0; 2023: -1.4.
  - External debt (percent of GDP): 2021: 21.6; 2022: 24.7; 2023: 25.0; 2024: 25.1; 2025: 24.8; 2026: 23.8; 2027: 23.3; 2028: 23.1.

*International Monetary Fund (IMF) — Executive Board conclusion and staff appraisal, September 25, 2024.*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [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)

_Source: https://www.imf.org/en/news/articles/2024/09/30/pr-24344-eswatini-imf-concludes-2024-article-iv-consultation_