Swaziland, one of Africa’s poorest countries and its last absolute monarchy, is near financial collapse, with a budget deficit of 14.3 percent of GDP and rapidly dwindling foreign reserves, the IMF said.
In its annual assessment of the troubled landlocked state, the International Monetary Fund said the government of polygamous monarch King Mswati III could dig up 600 million emalangeni in cuts “swiftly” to improve the health of its finances.
However, it conceded that the measures would be likely to push the economy into a 1.9 percent contraction this year, while inflation surges to 8 percent, Reuters reports.
Swaziland’s predicament stems from a sharp decline in revenues from the regional Southern African Customs Union (SACU), which has historically accounted for two-thirds of the government’s receipts.
The IMF said the drop-off in SACU revenues caused by a 2009 recession in regional giant South Africa was equivalent to 11 percent of Swazi output, but it also blamed the government for exacerbating its problems through profligate state spending.
In particular, it pointed to a 4.5 percent unbudgeted pay rise for politicians and civil servants a year ago, and ballooning costs of state spending on infrastructure and the army.
“The government faces severe liquidity constraints over the coming months,” the IMF said, describing Swaziland’s performance in implementing reforms such as trimming down its bloated civil service as “mixed”.
So far, the government has managed to keep its head above water by running up $180 million in domestic arrears and eating into the central bank’s foreign reserves, which now stand at $570 million, or just 2.6 months of import cover.
Austerity measures already imposed, combined with uprisings against autocracies in North Africa, have triggered rare protests in the nation of 1.4 million against the rule of Mswati, well-known for his love of fast cars and fine living.
Dozens of activists and students have been detained and police have used tear gas, water cannon and rubber bullets to break up demonstrations, although there appears to be little immediate prospect of Mswati’s appointed government collapsing.
Swaziland’s currency, the emalangeni, is pegged one-to-one to South Africa’s rand. Its economy is dominated by farming, in particular sugar cane and timber, and coal mining.
Mswati has a personal fortune estimated by Forbes at $200 million.