- The International Monetary Fund (IMF) has warned the Kingdom of Swaziland to step up its domestic revenue mobilisation while also exercising a disciplined spending regime amidst the effects of global recession and declining regional customs (SACU) revenues.
The IMF mission, led by Norbert Toé visited Mbabane during July 8–16 to review recent economic developments and discuss the impact of the global downturn on the Swazi economy and the authorities’ policy response.
At the conclusion of the visit, the IMF mission chief said: "Swaziland is being adversely affected by the second round effects of the global economic downturn, albeit to a lesser extent than similar small open economies. Real GDP growth in 2009 is projected to decelerate sharply but remain positive at 0.4 percent”.
The mission said the decline in growth will largely be on account of a contraction in manufacturing and mining, and a rebound in sugar production in Swaziland.
The IMF has further noted that the Swazi inflation is projected to decline to single digits as pressures related to food price increases in 2008 subside.
"The fiscal position, which recorded a surplus in 2008–09, is expected to swing into a deficit this current fiscal year (April 2009–March 2010) on account of escalating expenditures and a decline in SACU revenue,” the mission stated, stressing that while some fiscal loosening to support domestic demand in the face of the significant weakening of economic activity in Swaziland may be warranted, there was a need to maintain fiscal sustainability over the medium term through appropriate revenue and expenditure policies.
“Stepped up domestic revenue mobilisation efforts should include fully operationalising the revenue authority and implementing a value-added tax to broaden the tax base. At the same time, cuts in expenditure will also need to be undertaken while allowing for additional spending on education, health, and other priority programmes,” the IMF mission said.
The mission further added that public financial management reforms and the implementation of the government’s civil service reform would be critical to ensuring efficiency in public spending in the Kingdom of Swaziland.
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