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.
See also
SWAZI ECONOMY SET TO HIT ROCKS
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