Thursday, 27 January 2011

We need to talk about Swaziland

Unpaid government suppliers fear that their business may have to close, government vehicles lack petrol, and a massive loan to government coffers from the central bank to cover short-term necessities like civil servant salaries all suggest an accelerating crisis.
Swaziland has a problem. The last absolute monarchy in Africa is in financial crisis. One of the reasons for the problem is that between 20% and 60% of Swazi GDP was coming from SACU customs revenue, which took a massive knock with the global financial crisis. Of course, there are other problems - the IMF maintains that the civil service is far larger than is needed and spending priorities are problematic.

Government support for local humannitarian NGOs has already been reduced by 14%. Prices are rising. Important government functions such as road maintenance are not taking place, making it particularly difficult for people to reach clinics and markets. The IMF has recommended tough social spending cuts. The Swazi government has announced that 7000 people will lose government jobs in 2011.

The World Bank yesterday announced the approval of a $26.9 million loan to improve rural and urban local government capacity. The idea is that improving government capacity will improve service-delivery. This is a noble plan but unlikely to help that much if there is no money to pay local government staff or fund programmes. The IMF anticipates that without dramatic changes to the economic situation, borrowing to support current levels of spending will reach 75% of GDP by 2015.

Swaziland is a small, landlocked country with a population of 1 million and a large HIV/Aids burden (26% of adults). The country is considered a lower-middle-income country but is extremely heavily dependent on South Africa. The local unemployment rate is 40% and many people live in poverty.

Growth in 2011 is estimated at 2%, with budget deficit expanding to 16% of GDP. Without the customs revenue on which the government of Swaziland has been so heavily dependent, it is unclear how the country can possibly maintain its economy, even with the kind of spending cuts that will leave much of the population hungry and without transport, education or healthcare services.

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