SWAZI ECONOMY SET TO HIT ROCKS

Swaziland’s economy is heading for a shipwreck of Titanic proportions after news that the International Monetary Fund (IMF) has withdrawn support for the kingdom’s financial recovery plan.

Since 2010 the IMF has been working closely with the Swazi Government supporting its ‘fiscal adjustment roadmap (FAR)’ – a plan for recovery that included getting more revenue through taxes and reducing the public sector wage bill.

The Swazi Government drew up the plan and was aided by the IMF in its implementation through a procedure known as the staff-monitored programme.

But even though the FAR was the work of the Swazi Government and was completely under its control, the government failed abysmally to implement it.

Central to the plan was to reduce the public sector wage bill – that of teachers, nurses and other civil servants – by 10 percent. This it failed to do.

The government did force through 10 percent salary reductions for politicians, but last month (March 2012) MPs voted to have their pay restored because they said it was unfair that they were the only public sector workers to have taken the cut.

This week, Joannes Mongardini, head of the IMF mission to Swaziland, confirmed that it was no longer working with Swaziland on the staff-monitored programme.

He told the Times of Swaziland, the only independent daily newspaper in the kingdom, ‘Government has yet to propose a credible reform programme that could be supported by a new IMF Staff-Monitored Programme.’

He added that the national budget announced in February 2012 included, ‘recurrent expenditures that are higher than what can sustainably be financed over the medium term’.

He said the budget did not provide sufficient resources to repay all domestic arrears.

‘Finally, the budget allocates an increasing share of resources to some sectors at the expense of education and health,’ he said.

Swaziland sought the help of the IMF because it was nearly broke and needed loans from international banks, such as the African Development Bank and World Bank, to survive. It could not get these loans until it proved its economy was in order and IMF support in the form of a ‘letter of comfort’ would enable it to do this.

Without the support Swaziland is alone. There is little hope it can secure loans from international banks and even a E2.4 billion (US$307million) loan that had been negotiated with South Africa looks likely to be withdrawn as one of its conditions was that Swaziland provided evidence that it was tackling its economic problems.

So what happens next? Since news of the IMF withdrawal broke this week there has been no public statement from the Swazi Government. We know from the past that it has been less than honest with the Swazi people about the state of the economy, with Barnabas Dlamini, the Prime Minister, even claiming a year ago in April 2011 that it had the ‘letter of comfort’ from the IMF supporting its bid for international loans, when no such letter existed.

Finance Minister Majozi Sithole, however, told local media this week he expected to have further talks with the IMF and World Bank starting next Thursday (19 April 2012), but it is difficult to see what they have to talk about, unless the Swazi Government can demonstrate it has control of the economy – which clearly it does not.

See also

IMF CALLS FOR SACRIFICE FROM THE KING

http://swazimedia.blogspot.com/2011/11/imf-calls-for-sacrifice-from-king.html

SWAZILAND FAILS ITS IMF TARGETS

swazimedia.blogspot.com/2011/08/swaziland-fails-its-imf-targets.html

S. AFRICA ‘SNEAKS LOAN TO SWAZILAND’

South Africa is sneaking E2.4 billion (US$320 million) to Swaziland to help it shore up its ailing economy so that the undemocratic kingdom does not have to instigate political reforms, a Swazi campaigning group claimed.

Swaziland asked South Africa for a E2.4 billion loan last August (2011), but the deal stalled because Pretoria wanted financial and political reforms as conditions. King Mswati III, sub-Saharan Africa’s last absolute monarch, put the block on the loan because he would not hold talks about unbanning political parties in his kingdom.

Now, the Swaziland Coalition of Concerned Civic Organisations (SCCCO) says the loan money is being channelled into Swaziland disguised as cash from the Southern African Customs Union (SACU). This way Swaziland gets the money without reforms by King Mswati.

Swaziland is due to get about E7.1 billion in 2012/13 from SACU. This is up from the E2.9 billion Swaziland got in the financial year just ended. SACU receipts are based on the amount of trade done in Southern Africa. But SCCCO says E7.1 billion is more than Swaziland should get based on trade expected over the next 12 months.

The Mail and Guardian newspaper in South Africa reported Archbishop, Meshack Mabuza, chair of SCCCO, saying his group suspected there had been deliberate over-estimation so that extra funds could be released to Swaziland without questions being asked.

‘We believe these estimates are over-inflated in order to give the R2.4 billion to Swaziland without any political or fiscal conditions,’ the Mail and Guardian reported him saying.

‘We just don’t see how with the current economic climate being so weak that regional imports are going to grow so rapidly,’ he added.

Mabuza said, ‘It just seems very suspicious that Swaziland should be getting so much more this year.’

Budget estimates for Swaziland over the next three years forecast a E200 million surplus for 2012/13 followed by deficits of E1.9 billion in 2013/14 and E1.7 billion in 2014/15 – suggesting that the amount of money Swaziland receives from SACU in 2012/13 will not be repeated in the following years.

South Africa’s Treasury spokesperson Bulelwa Boqwana told the Mail and Guardian the SCCCO’s claim was ‘factually incorrect’ and added the payment had been approved by a Council of Ministers [trade and finance] from the five Sacu member countries.

See also

SWAZILAND’S SACU CASH MYSTERY

http://swazimedia.blogspot.com/2012/03/swazilands-sacu-cash-mystery.html

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.

SWAZILAND LOANS DEAL ‘ILLEGAL’

A Parliamentary committee has accused the Swaziland Government of acting unconstitutionally by raising loans to get the money to pay public service salaries.

A report from the Finance Committee accuses the government of acting illegally when it put up its stake in the Swaziland Posts and Telecommunications Corporation (SPTC) and the cellphone company MTN, as collateral for loans in November 2011.

A great deal of secrecy surrounds the details of how much the government took as loans and from whom.

At the time it was speculated that the loans were worth E1.4 billion (US$180 million), enough to meet four months’ worth of public service salaries.

The Swazi Government refused to reveal the names of those giving the loans, or any details of their terms, claiming commercial confidentiality.

Now, a report from the Swazi Finance Committee tabled this week fills in some background to the deal, but the identity of what the committee calls the ‘entity’ making the loan remains secret.

Marwick Khumalo, chair of the Finance Committee, said the government had set out on a ‘wild hunt for funds’ to pay salaries.

According to the report, Minister of Finance Majozi Sithole informed the committee that in November 2011 it proved difficult for government to pay civil servants salaries.

The Times of Swaziland, the only independent daily newspaper in the kingdom ruled by King Mswati III, sub-Saharan Africa’s last absolute monarch, quotes from the Finance Committee report. It states, ‘In order to pay these salaries [government] had to clinch a deal with an entity and also had to put down shares in SPTC and MTN as collateral and the repayments are to be done over a period of six months.’

The Finance Committee reported that in October 2011 salaries were paid using money received from the Southern African Customs Union (SACU) and the Swaziland Revenue Authority and in December it was through collections and from Swaziland’s financial reserves.

The report says that in January 2012 salaries were paid from SACU receipts and according to Majozi Sithole, the Finance Minister, initially, government had to raise E500 million from parastatals that receive subventions from government.

‘He also stated that the payment of salaries for February would be a challenge,’ the report stated.

Khumalo, the Finance Committee chair, said the committee noted that the acquisition of loans to pay for salaries was done outside the provisions of the Constitution’s Section 204 (2).

‘The minister argued that they were given legal advice by their lawyers in the ministry that what they were doing was in order, using the Treasury Bills and Government Stocks Amendment Act 2010 as the basis for their actions,’ the committee report stated.

Khumalo disagreed and said that piece of legislation dealt exclusively with the sale of treasury bills and government stocks and made no provision for the acquisition of loans and or using government shares as collateral.

See also

PRIVATE LOANS AT LEAST E1.4 BILLION

http://swazimedia.blogspot.com/2011/11/private-loans-at-least-e14-billion.html

SWAZILAND DAYS AWAY FROM DISASTER

http://swazimedia.blogspot.com/2011/11/swaziland-days-away-from-disaster.html

IMF CALLS FOR SACRIFICE FROM THE KING

http://swazimedia.blogspot.com/2011/11/imf-calls-for-sacrifice-from-king.html

SWAZI PRINCE BLAMED FOR LOAN DELAY

An ill-timed outburst by King Mswati III’s advisor and senior member of the royal household, Prince Mahlaba is what has delayed Swaziland’s bid to secure a E2.4 billion bailout from neighbouring South Africa, the Nation Magazine in Swaziland reports.

Prince Mahlaba infuriated by the conditions attached to the loan said its acceptance would be tantamount to selling the country to South Africa. He was particularly against the one condition that would have paved way for democracy and the unbanning of political parties.

Inside sources revealed to the magazine that signing of papers for South Africa to transfer the first tranche was put on hold pending further talks between King Mswati and President Jacob Zuma. The king was already in seclusion in preparation for the sacred incwala ceremony when the proposal for fresh talks was made.

The proposal for a fresh round of talks was made to new Minister of Foreign Affairs, Mtiti Fakudze, on November 22 when he led a delegation to South Africa with the intention to finalise the loan deal by signing the papers.

The loan trail has blown hot and cold since August last year while the government dragged its feet in signing the deal. With the marked improvement of revenue from SACU which contributes over 60 percent to the national budget, the kingdom may altogether abandon the loan talks.

To read the full report in the Nation magazine, click here.