IMF WANTS MORE DRASTIC ACTION

The Swaziland Government made the economic crisis in the kingdom worse by agreeing a supplementary budget in November 2010, according to an International Monetary Fund (IMF) report published yesterday (13 January 2011).

And the Government’s decision to increase spending on ‘non-priority’ areas means it must impose even harsher measures on the Swazi people than those already announced.The IMF wants more government services to be privatised and a squeeze on wages in the kingdom, where seven in ten of the population already earn less than one US dollar a day.

The IMF blamed the Swazi Government for helping to create the economic crisis in the first place. It said the Ministry of Finance, headed by Majozie Sithole, the Finance Minister in Swaziland for the past ten years, was not able to cope with the crisis and needed more help to build up its capacity.

Top of the reasons for the economic crisis is what the IMF calls ‘a high government service wage bill’, which has ‘contributed to making the Swaziland wage bill one of the largest in Sub-Saharan Africa’.

The economy generally in the kingdom ruled by King Mswati III, sub-Saharan Africa’s last absolute monarch, ‘continues to underperform other Southern African Customs Union (SACU) members, reflecting an overvalued exchange rate, continued structural impediments to growth, and the heavy toll of HIV/AIDS on economic activity’.

This lack of good management coupled with a reduction in cash receipts from SACU has led to the crisis, the IMF said.

‘The government also added to fiscal pressures by submitting a supplementary budget to parliament in November 2010 to clear capital expenditure arrears. The deficit has been financed through a drawdown of government deposits at the central bank and domestic arrears on all expenditure items, except wages and utilities,’ the IMF said.

IMF Directors said there would have to be ‘additional measures in the 2011/12 budget to compensate for recent increases in non-priority [Government] spending’. Although it did not mention the Sikhuphe Airport project by name, it must have had in mind the government’s decision in December 2010 to to spend another E350 million (about US$50 million) on King Mswati’s vanity project.

The government’s so-called Fiscal Adjustment Roadmap (FAR), put forward by Barnabas Dlamini, Swaziland’s illegally-appointed Prime Minister, and Sithole, the Finance Minister, will not be enough to rescue the economy, the IMF said.

It welcomed the FAR, which includes raising taxes from the poorest people in Swaziland, sacking 7,000 public servants and introducing Value Added Tax (VAT) on goods and services, ‘but emphasized the need for more ambitious and sustained efforts to revitalize Swaziland’s economic performance’.

The IMF welcomed the Government’s ‘intention to reduce the budget deficit to 2 percent of GDP by 2014/15. However, they considered that achieving this target requires bolder fiscal adjustment and budgetary reforms than envisaged in the current plan’.

It said, ‘additional technical assistance is also necessary to build up implementation capacity, particularly at the Ministry of Finance.’

The IMF said the Government should ‘mobilize additional domestic financing’. Although it did not spell out the consequences of this, it could mean new taxes, higher existing taxes and getting more from other forms of government revenue. It could also mean more government borrowing, but in a kingdom of one million people, where seven in ten are in abject poverty, there isn’t much money to borrow.

IMF Directors also ‘called for stepped up efforts to improve the business environment, including by reviving the government’s privatization program, reducing the cost of doing business, and keeping labor costs in line with those in the region’.

The International Monetary Fund (IMF) report came at the end of a visit it made to Swaziland, which ended on 10 January 2011. To read the full report, click here.

See also

MORE DIRE NEWS ON SWAZI ECONOMY

http://swazimedia.blogspot.com/2011/01/more-dire-news-on-swazi-economy.html

WHAT THE IMF SAID TO SWAZILAND

http://swazimedia.blogspot.com/2010/12/what-imf-said-to-swaziland.html

SWAZILAND GOVERNMENT SNUBS IMF

The decision of the Swaziland Government to spend another E350 million (about US$50 million) on Sikhuphe International Airport puts it on a collision course with the International Monetary Fund (IMF).

Only weeks after accepting that the IMF would have a significant role to play in the saving of the Swazi economy, which is in crisis after years of mismanagement by the government, it has ignored one of the IMF’s key recommendation.

Recommendation No3 states, ‘The [Swaziland] Government would also suspend the capital projects that have not already been started to date and the purchase of goods and services. Government will further slow down the implementation of existing capital projects in line with available financing.’

Sikhuphe Airport, which is a vanity project of King Mswati III, sub-Saharan Africa’s last absolute monarch, is an ‘existing capital project’. The extra E350 million the government decided to give the project this year is over and above the E706 million budget it had previously agreed. As we all know the kingdom is broke so the Swazi Government can’t argue that the money has come from ‘available financing’.

What does Barnabas Dlamini, Swaziland’s illegally-appointed Prime Minister think he is up to? He and Majozie Sithole, the kingdom’s Finance Minister for the past decade, have for many years constantly ignored the IMF’s advice. The IMF stated in November 2010 that the present crisis could have been avoided if the Swaziland Government had spent money more wisely in the past. Even when the Sikhuphe Project was first announced the IMF said it was a bad use of money which could be better used on development projects.

Because of their criminal negligence of the Swazi economy, the kingdom is now on its knees. It’s only realistic chance of survival is to accept the help of the IMF. In October 2010 with a great fanfare Dlamini announced that a ‘deal’ had been done with the IMF. That wasn’t quite true, but the IMF said if certain conditions were met it would support Swaziland’s bid for a loan from the African Development Bank.

And within the blink of an eye, Dlamini and Sithole have ignored the latest IMF advice.

A team from the IMF comes to Swaziland at the end of January 2011 – Dlamini and Sithole had better have their excuses ready.

MORE GOVERNMENT HEALTH CUTS

Here’s further evidence that Majozi Sithole, Swaziland’s Finance Minister, wasn’t telling the truth when he said the kingdom’s health services wouldn’t suffer cuts as a result of the government’s mismanagement of the economy.

Swaziland Hospice at Home, which looks after terminally ill and poverty stricken people in the kingdom, has only received half of the budget subvention it is due.

It needs E2,686,200 a year and it has so far received only E1,343,100.

Yesterday (10 December 2010), I reported that doctors on call were not being paid and as a result they were threatening not to attend emergencies and were putting lives at risk.

Sithole had claimed that despite government’s decision to cut 7,000 public sector jobs and other spending cuts, as part of an attempt to save the Swazi economy from meltdown, health services in the kingdom would not be affected.

See also

GOVERNMENT CUTS: ‘PEOPLE WILL DIE’

http://swazimedia.blogspot.com/2010/12/government-cuts-people-will-die.html