Swaziland (eSwatini) pledged to cut public sector
jobs, contain wages and award below inflation salary increases in order to get
a loan from the International Monetary Fund.
These were some of the pledges made that included
cutting public spending. Some personal taxes and VAT (Value Added Tax) would
rise. Taxes on companies would not be cut.
A loan of US$110.4 million to help fight the
coronavirus (COVID-19) pandemic was
agreed on 29 July 2020. Swaziland faces an urgent balance of
payments crisis.
The loan was the full amount available under the IMF’s
Rapid Financing Instrument. In a statement
last week Neal Rijkenberg, the Swazi Finance Minister,
estimated a total of US$207 million was needed to shore up the economy.
Swaziland is seeking additional loans from the World Bank and African
Development Bank (AfDB).
The job cuts and salary pledges were part of a package
of promises set out in
a letter dated 20 July 2020 to the IMF jointly signed by Rijkenberg and Majozi V. Sithole, Governor, Central Bank of
eSwatini.
In the letter they stated, ‘The virus is
spreading rapidly, and Eswatini’s relatively high HIV/AIDS prevalence and an already pressured health care
system exacerbate risks that the pandemic could
propagate even faster. To contain the pandemic, the government has swiftly put
in place an array of containment measures. It has declared a national emergency
and imposed a partial lockdown across the country, including travel bans, closure of schools and universities, and a
suspension of all non-essential activities. These measures, combined with a
sharp decline in external demand for eSwatini’s key exports and spillovers from
South Africa, are causing a dramatic fall in economic activity.’
They promised the IMF, ‘We will contain public wage
spending, continuing our policies of gradual employment reduction and
lower-than inflation salary adjustments. We have commissioned an external
review of the extra budgetary sector with the aim of rationalizing spending and
transfers to key state-owned entities and merge entities with similar mandates
over time.
‘We will also continue to pursue new ways to reduce
our operational expenditures, and intend to improve the targeting of our main
social assistance programs.
‘In addition, about 40 percent of our
adjustment plan relies on boosting our domestic revenue by broadening tax
bases, increasing some tax rates such as personal taxation and VAT, and
continuing strengthening tax administration.
‘To protect revenue collection, we also
commit not to introduce measures that would reduce corporate income tax
revenue. This strategy will allow us to broadly preserve capital spending and
domestic capital accumulation, and caring more effectively for the most
vulnerable members of the society.’
They also pledged, ‘The government will intensify
reforms to strengthen governance, transparency and accountability, and reduce
vulnerabilities to state-capture and other forms of corruptions.’
See also
IMF gives
Swaziland emergency coronavirus loan but is only half what is needed
IMF
reports Swaziland public debt rising, foreign reserves fallen ‘below adequate
levels’
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