NO REFORMS SO ECONOMY DOOMED

The following is a statement from the Swaziland Solidarity Network concerning the melt down in the economy of Swaziland.

SOURCE

SWAZILAND INCREASES ITS WAGE BILL DESPITE ECONOMIC MELT DOWN

18^th October 2010

In a move that is bound to lower Swaziland’s standing in the eyes of international financial institutions and infuriate the country’s labour unions, the country’s government has released a circular which aims to increase the number of people on its pay roll and the salaries of its politicians. As reported in the Times of Swaziland this circular, which was backdated to the 1st of April 2010, was issued in a press statement released by the Prime Minister’s office on the 14th of October.

This is Finance Circular No.1 of 2010, which replaces Finance Circular No.2 of 2009 which was rejected by parliamentarians who felt that cabinet ministers had been given higher salary increments than themselves. As a result of this disagreement between Swaziland’s politicians, a joint committee comprising cabinet ministers and ordinary members of parliament was tasked to review the initial circular with the objective of finding a compromise. The compromise between the two parties has seen both parties’ aggregate salaries being increased while introducing a plan to give former Prime Ministers a lump sum amounting to half their annual salaries and a monthly pension for the rest of their lives.

When quizzed about this circular, the Minister of Finance, Majozi Sithole, further explained that the money to be paid out to former Prime Ministers will depend on their sources of income after leaving office. In this regard a former Prime Minister who is unemployed will be given a monthly salary of E10 000 while those who are employed will presumably receive less. Moreover, in the event that a former Prime minister passes away, his spouse is to be paid E5000 for the rest of her life. This is a significant amount of money as four former Prime Ministers are still alive to receive this gift from the government.

It is interesting to note that this comes only a few weeks after the government sought a loan of E525 million (US$75m) from the African Development Bank only to be told that it would only receive it if the World Bank approved the country’s capacity to repay the loan. This in itself is compounded by the fact that for many years the World Bank and the International Monetary Fund have been advising the country to reduce its excessive expenditure which comprises Royal expenditure and an unsustainable wage bill. A further crippling factor is that the recent reduction in the country’s revenue as a result its reduced SACU (Southern African Customs Union) has left the country in desperate need of finances and it is estimated that in future it will be forced to dig into its reserves in order to pay its civil servants. Upon depletion of these reserves the country will not be able to sustain itself.

Without any fiscal reforms in place, as shown by the increases in cabinet and parliament salaries, the country is doomed to not only being denied a loan by the African Development Bank but also eventual economic collapse. This will further worsen the plight of the country’s poorest citizens.

Issued by the Swaziland Solidarity Network [SSN]- South Africa Chapter

NO IMF MONEY FOR SWAZILAND

The media in Swaziland are premature in hailing the meeting between the Swazi Government and the International Monetary Fund (IMF) as a substantial move towards solving the kingdom’s financial crisis.

Barnabas Dlamini, Swaziland’s illegally-appointed PM; Majozi Sithole, the Finance Minister; and other government representatives met with the IMF in Washington on Monday (4 October 2010).

Swazi state radio SBIS was quick to call the meeting a huge success and other media in the kingdom, ruled by King Mswati III, sub-Saharan Africa’s last absolute monarch, were quick to follow. This is a pity because when it comes to news coverage SBIS is a propaganda outfit for the king and his government and cannot be trusted to tell the truth.

The Times of Swaziland, the only independent daily newspaper in the kingdom, followed the SBIS line. It reports today (6 October 2010) that Swaziland ‘appears to have finally won the support of the International Monetary Fund (IMF) and the World Bank’.

It reports, the IMF and the World Bank gave a ‘“thumbs-up”’ to the country’s fiscal adjustment programme’.

But this is a strange interpretation of what actually happened. The IMF and World Bank said that Swaziland needed a proper plan to improve government spending and finance management. It added it would help Swaziland to draw up such a plan.

And that was it. This is what the IMF has been telling Swaziland for years. Its economy is in a mess because of bad management by the government. It is still in a mess, the IMF says, and more work needs to be done.

That means that the IMF still wants the government to cut public spending and sack civil servants.

The Swazi Government is trying to get a loan of about E525 million (75 million US dollars) from the African Development Bank (ADB). In August 2010, the ADB said Swaziland needed the support of the IMF and World Bank. That support was not forthcoming.

The IMF and World Bank have not given that support this week, so nothing has changed.

Now there is a real likelihood that the government does not have money to pay its salary bill this month (October 2010). Finance Minister Sithole had assured civil servants the money would be there, but earlier this week the European Union said it would not bail out the government and now the IMF and World Bank have not come up with the necessary letters of support to get the ADB loan.

Prime Minister Dlamini and Finance Minister Sithole should come clean: they have failed to get the money.

SWAZI MINISTER AND EU ‘BAIL-OUT’

Swaziland Minister of Finance Majozi Sithole has claimed the European Union is ready to donate money so that the government can carry on paying its army of civil servants.

There are fears that the kingdom, ruled by King Mswati III, sub-Saharan Africa’s last absolute monarch, is so broke it won’t be able to pay civil servants salaries next month (October 2010).

Sithole claims that everything is in hand and there’s no need to worry because he has lined up support from international donor agencies, including the European Union.

I doubt that he’s telling the truth. Only last month (August 2010) the International Monetary Fund and the World Bank refused to support Swaziland’s bid for a loan from the African Development Bank because the Swazi Government was misusing funds to keep an unnecessary large number of people in jobs as civil servants.

It is partly because Sithole and the rest of the government refuse to cut jobs that the economy is in freefall. It is also badly affected by reductions in income from the Southern African Customs Union (SACU).

Sithole made his claim on state-controlled radio, SBIS, and denied reports that salaries would not be paid.

According to the Swazi Observer, a newspaper in effect owned by King Mswati, he said, ‘We have already begun looking for money from international organisations.’

Sithole named the European Union as one organisation that had offered Swaziland support, including loans of money.

I’d be very surprised if the European Union is willing to lend money to pay the civil servants. As Swaziland moves ever closer to financial ruin there will be a number of calls on international aid and charity. Top of the list will be the 300,000 or so people who regularly need food aid, as well as those who will need medical help as Swaziland’s hospitals collapse. The salaries of civil servants will be low on the list of priorities of overseas’ aid organisations.

Sithole has been wrong many times in the past and I doubt if we can trust what he says now. But, time will tell, and we only have a few weeks to go to see if the civil servants get their salary cheques.

SWAZI ECONOMY ‘TO GRIND TO HALT’

Swaziland has taken a major step towards bankruptcy now both the International Money Fund (IMF) and World Bank (WB) have refused to back its attempt to get a loan of half a billion US dollars from the African Development Bank.

They refused to assist Swaziland because they are fed up with the way the Swazi Government has consistently refused to take proper control of the economy.

Now the Swazi Finance Minister Majozi Sithole says the government could grind to a halt.

In particular the IMF and WB are angry that the Swaziland Government continues to ignore their advice to cut back on the amount of money it spends on civil servants’ salaries. They say the size of the civil service is too big for a kingdom as small as Swaziland.

The Swaziland Government even went so far as to raise civil service salaries this year by 4.5 percent (2010) and therefore increase its spending by E200 million (about 25 million US dollars), not decrease it.

The IMF has also been worried in the past that Swaziland wasn’t spending public money wisely. The Sikhuphe International Airport is a case in point. Despite IMF advice not to proceed with the building, the airport – a vanity project for King Mswati III, sub-Saharan Africa’s last absolute monarch – is being built. The last official estimate was that it would cost 1 billion US dollars by the time it is completed. The completion date keeps getting put back so it is a fair bet this cost will rise still further.

The refusal to back the loan comes as a point that Swaziland’s economy is in freefall. This year the money the kingdom received from the Southern African Customs Union (SACU) was cut to E1.9 billion from E6 billion last year. SACU receipts accounted for 66 percent of the national budget in 2009. It is unlikely that receipts will rise significantly in future years and they might actually fall further.

To counter the effects of this, the Swaziland Government ordered all departments to slash their budgets by 14 percent to immediately save E1.5 billion.

Swaziland’s foreign reserves are also falling. Sithole told Parliament last week that the kingdom had enough reserves to cover the cost of 3.1 months of imports. He described this as ‘acceptable’, but in fact it is not 'acceptable' and is far below the six months level recommended by the Southern Africa Development Community.

And there’s little hope of Swaziland attracting foreign direct investment (FDI). As was reported in November, Swaziland is not deemed as a good place for investors to set up business because of its small market, its people are too poor and Swaziland’s limited international reputation as a destination for FDI.

Sithole admitted to parliament that the IMF and WB ‘refused to give us a letter of comfort because they are not convinced with our fiscal adjustment programmes’. He said as a result the government is facing a cash flow problem and the government could soon not be able to meet its commitments.

This means salaries will go unpaid and there will be no money for services such as health and education.

‘We are faced with a cash flow problem such that we might find ourselves lacking actual money to make purchases,’ he said.

‘There is no fear that government could grind to a halt,’ said Sithole.

But Sithole says he is on top of the situation. One ‘solution’, he says, is to make sure government collects all revenues and taxes due to it.

Things were going well he said and so far the government had received E36 million (about 4.5 million US dollars).

Oh that’s all right then. You do the arithmetic – the Swaziland Government fails to secure a loan for 500 million dollars, but it has 4.5 million in taxes to make up for it.

Who does he think he is fooling?