- The International Monetary Fund (IMF) in its latest assessment of Swaziland's economy expresses serious concerns about the government's exaggerated spending while experiencing a humanitarian crisis. "The widening fiscal deficit threatens macroeconomic stability, and weaknesses in governance are undermining social harmony and investor and donor support," the Fund concludes.
The IMF today published its so-called 2003 "Article IV Consultation" - or review of Swaziland's economic performance. Swaziland faces "a serious socio-economic situation," hw Fund concludes. Although it is classified as a lower-middle-income country, income distribution is highly skewed and two-thirds of the population is estimated to live on less than US$ 1 a day.
During the first years of this millennium, the Swazi economy actually had performed relatively well, with real GDP growth rates between 1.7 and 3.6 percent each year. Since last year, however, economic performance is stagnating as many of past years' gains had come through one-off effects such as the completion of the Maguga dam and the recovery of the sugarcane production.
In the 2003 and 2004 budgets, the situation however becomes critical, the IMF observed. The central government fiscal deficit is rapidly growing due to overspending. While larger expenditures had gone to pay increased public wages and transportation, the IMF also found the Swazi government to overspend on less necessary prestigious projects.
In particular, the Fund mentioned Swazi government spending on a Commonwealth Partnership Summit and the government's participation in some of its so-called Millennium Projects such as a new airport, designed for transcontinental flights to and from the small Kingdom, located close to the international airports of Johannesburg and Maputo.
In their review the IMF board of directors "underlined the importance of reorienting spending toward social sectors and avoiding frivolous expenditures." They found that that economic reform could remove the impediments to higher sustainable economic growth and bring about a broad-based improvement in living standards, which were becoming "increasingly urgent."
The IMF analysts also strongly criticised the lack of good governance in Swaziland, which is rules by King Mswati III, totally beyond popular control. A strengthening of governance was seen as "crucial" for ensuring the implementation of economic reforms and for "attracting donor and investor support." The IMF especially emphasised "the importance of strengthening the rule of law and improving fiscal transparency and accountability in order to ensure that the announced fiscal objectives are in fact achieved."
Government spending should also be redirected toward "critical social sectors, such as health and education; and improving public expenditure management," the IMF analysts said. They further "regretted that social needs related to HIV/AIDS remain largely unmet." Nevertheless, the recent establishment of the National Emergency Response Committee on HIV/AIDS was a good step toward coordinating a national anti-HIV/AIDS strategy.
The Fund however called on the Swazi government to "sharpen its focus on improving social services, including through a reorientation of public expenditure, in order to alleviate hardships related to the illness and attract stronger donor support." It was suggested that development of a comprehensive poverty alleviation strategy would be helpful in this regard.
Although Swaziland is experiencing a far-reaching humanitarian crisis due to extremely high rates of HIV/AIDS, unemployment, poverty and food shortages, donors have lend little support to the Kingdom. This is mainly a result of the King's exaggerated spending on prestigious projects and on private needs, including the announced construction of several new palaces. This has caused outrage among donors.
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