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Thursday, 27 January 2011


The Swaziland Government got a massive vote of no confidence yesterday (26 January 2011).

The Central Bank of Swaziland managed to sell only one-fifth of the government bonds that it hoped. The money received was to be used to help keep the economy afloat as the Swazi Government tries to appease the International Monetary Fund (IMF), which has already demanded massive jobs cuts, higher taxes and savage cuts in most government departments.

Nobutula Dlamini, a spokeswoman for the central bank, said bidders for the bonds wanted interest rates to be higher.

‘The rates bidders were seeking were just crazy,’ she said. Interest rates had been set at 8.25 percent.

What the Central Bank didn’t say was that investors wanted higher yields on the bonds because there are risks that the investment will not be repaid. Put simply, when investors think there are high risks, they want high yields. In this case investors decided that the risk with Swaziland was just too great.

Swaziland offered E 750 million (US$106 million) worth of seven-year bonds and received E351.3 million in offers, selling only E146.3 million of the bonds. The average yield (the amount of interest investors will get) was 8.644 per cent.

The failure to sell the bonds is another crisis for the Swaziland Government. The IMF in a report published as recently as Monday (24 January 2011) said in order to pay its current bills, while ‘preserving pro-poor spending’; the Swaziland Government said it would raise ‘significant additional bond financing over the next few months’.

This, the Swaziland Government has now failed to do. It is not clear where the government intends to find the money. Yesterday’s failure to raise money probably means the government must return to the markets and offer bonds at vast interest rates (which have to be paid out of the kingdom's budget) to try to get the money, or make more cuts in government spending, above those already announced, but not yet implemented.

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