FINANCIAL MELTDOWN ‘IMMINENT’

The International Monetary Fund has warned that Swaziland's fiscal crisis has reached a critical point and there is a high risk that the kingdom will be unable to pay its civil servants' wages for the next few months, the Mail and Guardian newspaper in South Africa reports.

The newspaper quotes an IMF report saying that Swaziland’s gross domestic product (GDP) will contract by 2% during 2012 and, if the country does not change its "unsustainable" fiscal policy, its debt-to-GDP ratio could reach more than 80% by 2016.

The IMF sounded the alarm that the macroeconomic outlook for 2012 was "bleak". It urged the government to take "upfront" action such as cutting jobs and reducing the cumbersome public wage bill to protect the lilangeni, which is pegged to the rand and already overvalued by as much as 33% and at risk, the fund said.

Consumer price inflation rocketed from 6.5% in November last year to 7.8% in December, a trend the IMF expected to continue into 2012, forcing an uncomfortable acceleration in the prices of food and fuel that would be most acutely felt by the poorest members of society.

The IMF warned: "Swaziland's fiscal crisis has reached a critical stage. Budget financing has dried up, domestic arrears continue to mount and the risk of not being able to pay civil servants' wages over the next few months is high."

To read the full report from the Mail and Guardian, click here.