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Friday, 24 September 2010

SWAZILAND ECONOMY ‘CATASTROPHE’

Just how bad is the state of Swaziland’s economy?


It’s a ‘catastrophe’ if you believe Roman Grynberg, senior research fellow at the non-governmental Botswana Institute for Development Policy Analysis, who said this week that changes made in the past to the way Southern Africa Customs Union (SACU) revenues were distributed, added to further changes being discussed for the future, would have ‘absolutely catastrophic’ consequences for countries such as Swaziland and would be ‘serious for political stability in the whole Southern African region’.


Grynberg was predicting the future, but the present is pretty grim as well.


There are rumours flying around Swaziland at present that the government of King Mswati III, sub-Saharan Africa’s last absolute monarch, is overspending by E30 million a month (4.2 million US dollars) and is using its foreign currency reserves to pay bills.


Finance Minister Majozi Sithole has already said that government revenues are so low that ‘non-SACU’ revenues are not enough to pay the government wage bill. There are well-founded fears that the government will not be able to pay civil service salaries from next month (October 2010).


The government needs income and it needs it quickly. It is trying all the usual tricks of economists to stay afloat, such as seeking loans, selling assets, issuing bonds.


So far they have little success. In August 2010 the World Bank and the International Monetary Fund refused to support Swaziland in its effort to secure a 500 million US dollar loan from the African Development Bank on the grounds that the government had consistently ignored warnings that its wages and salaries bill was too high for a kingdom of its size.


There is little interest in buying bonds in Swaziland (countries all over the world, most with much more stable economies than Swaziland, are selling bonds), which leaves the sale of assets as the last resort. But, Swaziland has few state -held assets, but what it does have is an unknown amount of wealth ‘held in trust’ for the Swazi people by King Mswati, but there is little likelihood that he will give up his control of this money to help out.


All that is realistically left for Swaziland is aid from the international community to ensure that people don’t starve and that the health and education services in the kingdom don’t grind to a halt.


But the Swazi regime didn’t help its cause earlier this month when police and security forces harassed and intimidated foreign nationals during the Global Week of Action before throwing them out of the kingdom.


This action will not make people in developed countries feel well disposed to Swaziland.


There is also suspicion that ‘development aid’ destined for Swaziland doesn’t go where it is needed, but instead is siphoned off by King Mswati to pay for his palaces, Mercedes cars and his general lavish lifestyle.


So to sum up: there is overspending by E30 million a month, little chance of selling bonds or assets or securing loans, and a potentially unsympathetic international community.


Sounds to me like Grynberg’s ‘catastrophe’ has already struck.


CLARIFICATION. The amount of the loan sought at the ADB is 75 million US dollars - about E500 million.

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