Officials from the International Monetary Fund (IMF) are to visit Swaziland again this week as the kingdom stares into the financial abyss.
Majozi Sithole, Swaziland’s Finance Minister, will announce a further 20 percent of public spending cuts in his budget this Friday (18 February 2011).
Sithole told the Bloomberg Financial News Service, Swaziland would have a ‘credibility’ problem if it did not.
Public service jobs will be cut and inflation is expected to rise. Economic growth will remain unchanged in the coming year.
Also planned is a new Value Added Tax and a 10 percent cut in support for state-owned companies.
Below is a report from Bloomberg published today (15 February 2011). SOURCE
Swaziland Plans to Cut Spending and State Jobs, Finance Minister Says
By Franz Wild and Vuyisile Hlatshwayo
Swaziland, Africa’s last absolute monarchy, will slash spending and fire thousands of state employees as it tries to ease a fiscal crisis, Finance Minister Majozi Sithole said.
In a budget to be announced on Feb. 18, the government will introduce a value added tax and slash recurrent spending, such as salaries, by about 20 percent, Sithole said in an interview yesterday in Mbabane, the southern African nation’s capital. It will also cut support for state-owned companies by 10 percent in the fiscal year through March 2012.
Budget cuts “have to be very large,” Sithole said. “For us credibility is very important. We would not want to have a budget, but not have the physical cash to support it.”
Swaziland, which borders South Africa and whose 1.2 million people are ruled by King Mswati III, released an International Monetary Fund-backed plan last year to counter reduced income from the Southern Africa Customs Union. Lower imports because of recession in neighboring South Africa during the global financial crisis cut funding from what accounted for about 60 percent of state revenue. SACU pools customs payments from South Africa, Lesotho, Botswana, Namibia and Swaziland.
Swaziland’s budget deficit will probably widen to about 16 percent of gross domestic product in the 2011-12 fiscal year, the IMF said on Jan. 24.
Customs union money tumbled about 62 percent last year, Sithole said.
“For the financial year 2010-11 we were seriously affected by our SACU receipts,” Sithole said. “We have over the years relied heavily on the revenue received from SACU.”
The government plans to freeze state salaries and cut 7,000 civil servant jobs, about 20 percent of the total, to bring down a “huge” wage bill, he said. Budget spending was 10.1 billion emalengeni ($1.39 billion) for the year to March 2011.
The move will add to unemployment which stands at about 43 percent, according to the government.
The government plans to raise taxes and has applied for a $100 million loan from the African Development Bank as it struggles to raise cash. The central bank sold one-fifth of the 750 million emalengeni ($103 million) of seven-year bonds it offered on Jan. 26. The AfDB loan depends on an endorsement from the IMF of the country’s plans to cut spending, Sithole said. IMF officials will visit the country this week, he said.
Economic growth will probably be unchanged at 2 percent this year, while inflation is estimated to accelerate to 6 percent in 2011 from last year’s 4.5 percent as oil prices and other imports costs rise, Sithole said.