A fiscal crisis gripping Swaziland, Africa’s last absolute monarchy, is deepening despite an emergency US$370 million loan from South Africa earlier this month, the International Monetary Fund (IMF) said yesterday.
After a visit by its representative to the landlocked southern African nation, the IMF urged the government to make further cuts to what is officially the continent’s most bloated democracy to try to balance its books.
However, it gave a candid assessment of reforms so far, saying the appointed administration of King Mswati, who has at least a dozen wives and a personal fortune estimated at US$200 million, had missed several targets to cut a budget deficit of more than 14 percent of GDP.
“The mission advised the government to pass a supplementary budget to cut expenditures, while preserving pro-poor spending, and strengthen expenditure controls in order to restore fiscal sustainability,” it said in a statement.
The Washington-based institution, which has refused to lend money until Swaziland takes a hatchet to its massive public wage bill, also urged the government to pay back money borrowed in emergency from the central bank, lest it jeopardise a one-to-one currency peg with South Africa’s rand.
“Preserving the parity with the South African rand is of utmost priority,” the IMF said, adding that central bank reserves had dropped to US$554 million, or 2.2 months of import cover, as of August 26.
Three months’ import cover is widely considered the minimum for a stable currency.
Swaziland’s fiscal problems stem from a 2009 recession in South Africa that triggered a collapse in revenues from the SACU regional customs union that has historically accounted for two-thirds of Swaziland’s budget.
The government has kept its head above water by using central bank reserves and running up at least US$180 million in unpaid bills. Its efforts to cut public spending and raise taxes from a moribund economy have met with little success.
The budget crunch sparked unprecedented public protests against Mswati, who is accused of running the country of 1.4 million people has his personal fiefdom.
Dissident groups inside and outside the country where political parties are banned are hoping the cash crunch will force political change, although the South African loan has bought the government time.