Thursday, September 1, 2011


Swazi Observer

1 September 2011


E2.4bn loan’s future bleak?

SWAZILAND’S E2.4 billion loan from South Africa could be hanging in the balance following the country’s lack of commitment towards implementing fiscal reforms.

Conditions attached to the loan included the introduction of fiscal and related reforms required by the International Monetary Fund (IMF) and government tabling its Public Finance Management Bill in parliament by October [2011].

However, government has failed to meet a number of targets outlined under a six-month IMF Staff-Monitored Programme which included reforms aimed at returning the country to a sustainable fiscal position and stabilising its debt burden.

In a recent assessment following a two-week visit to the country by a team from the IMF, the mission said the fiscal crisis in Swaziland continues to deepen. It also observed that economic activity “remains subdued” while inflation was on the rise.

“The IMF’s assessment could affect negotiations over an E2.4 billion loan promised to Swaziland last month by South Africa,” reported a South African publication.

Meanwhile, a local economist said without implementation of fiscal reforms the IMF cannot give the country a letter of comfort, without which, international financiers like the African Development Bank (AfDB) and World Bank were unlikely to extend loans to Swaziland.

He said even the promised loan from South Africa could be hanging in limbo if the country does not commit to implementing the much needed reforms, especially to reduce the wage bill which was currently the largest in sub-Saharan Africa.

Having failed to conclude discussions on the first assessment under the IMF Staff-Monitored Programme which expired in June, Swaziland currently has no agreement with the IMF with regards to implementation of fiscal and related reforms.

“The problem is, without any agreement with the IMF, there cannot be any money from South Africa, the World Bank or African Development Bank,” said the economist.

“It certainly will not come if there’s no Staff-Monitored Programme, especially because there is no clear commitment from government and it has also not fulfilled the previous Agreement.”

He said this was an unfortunate situation, especially because government was fast running out of money and yet it has no clear roadmap on how it was going to solve the liquidity crisis.

“Unless government implements the recommended reforms, the international community cannot help Swaziland. We’re basically on our own.” Explaining, he said a person cannot go into the bank for a loan without any collateral, which was basically an assurance that they would repay the money. “Without that kind of assurance, you cannot be granted a loan.”

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