The Swaziland Government has maintained an eerie silence about how it is going to save the kingdom’s ailing economy in the weeks since the International Monetary Fund withdrew its support for its financial rescue plan.
The IMF said in effect that the government’s plan to cut public spending and at the same time raise additional revenue from taxes was unworkable. By withdrawing its support, the IMF makes it almost impossible for Swaziland to raise loans from the World Bank or the African Development Bank to help finance its way out of trouble until it can get the economy back on its feet.
Without the loans it is impossible to see how the kingdom, ruled by King Mswati III, sub-Saharan Africa’s last absolute monarch, will be able to pay its bills, including the salaries for the estimated 35,000 civil servants in the kingdom, one of the largest public labour forces on the continent.
The government has not publicly spoken about what its next moves might be since the IMF withdrawal. It has been shielded a little by a larger than expected payment of E7 billion from the Southern Africa Customs Union (SACU). This money enables the government to pay its immediate bills and ensure that wages can be met for at the next few months. But it is not expected that future payments from SACU will be as generous.
The government, handpicked by King Mswati, fears that if it cannot pay the salaries there will be civil unrest. Already teachers, students and public service workers have taken to the streets to demand higher salaries and scholarships.
An announcement from the Central Bank of Swaziland (CBS) that foreign exchange reserves have fallen to a new low makes the government’s position close to critical. Last week the CBS reported that for the month ended in March 2012, gross official reserves stood at E3.77 billion, which is a contraction of 6.8 per cent from the previous month where the reserves stood at E4.044 billion, which is lower than January’s E4.24 billion.
The CBS reported the fall in recent months was because reserves had been used to finance the government’s spending.
The CBS said that the reserves were only enough to meet the cost of Swaziland’s imports for 1.9 months, lower than the 2.1 months cover recorded at the end of February.
Usually, reserves should be able to cover at least three months’ of imports of a country. A further decline in reserves poses a threat for the Swazi currency, the Lilangeni’s continued pegging to the South African Rand.
The whole currency reserves crisis also deters investor confidence.
SWAZI ECONOMY SET TO HIT ROCKS