Tuesday, July 28, 2020

Swaziland seeks US$207m IMF loan to save sinking economy as coronavirus worsens

Swaziland (eSwatini) is seeking US$207 million from the International Monetary Fund as its economy continues to slide because of the coronavirus pandemic.

Swazi Finance Minister Neal Rijkenberg said the money was needed ‘to cushion the budget and help address urgent balance of payment needs’ created by the coronavirus (COVID-19) crisis.

Swaziland is already in recession and international trade and tax collections within the kingdom have been badly hit since March 2020 when many businesses were forced to lockdown.

In a statement on Tuesday (28 July 2020) Rijkenberg said Swaziland would seek the money from the IMF’s Rapid Financing Instrument (RFI) which had been set up to help countries to help counter the effects of coronavirus.

Rijkenberg said the coronavirus crisis had ‘severely affected eSwatini’s economy, exacerbating pre-existing economic challenges’ which had led to ‘a significant contraction in economic activity’.

As of 27 July 2020 the Ministry of Health had reported 2,316 positive cases of coronavirus in Swaziland and 24 deaths. 

He added the government had been forced to spend money on a package of measures to tackle the coronavirus crisis that it had not budgeted for. He said, ‘The package includes additional health spending, ramped up food assistance programs, increased social protection transfers and improved access to water and sanitation facilities for the vulnerable. To accommodate this additional expenditure, additional resources have had to be mobilised, which would have worsened Government’s fiscal position, which had already been in a precarious state prior to the emergence of the scourge.’

The US$207 million represents 5.3 percent of Swaziland’s GDP. Rijkenberg said the request would be presented to the IMF Board before the end of this week and the outcome would be communicated soon thereafter.

Separately, also on Tuesday it was reported that the Labour Commissioner, Mthunzi Shabangu’s office had received requests from 105 different companies to retrench 14,048 workers who were presently on unpaid layoffs. Companies said they could no longer afford to pay employees. Labour Advisory Board discussions are expected to take place on Friday.

The IMF rules for receiving the RFI loan include that the country ‘is required to cooperate with the IMF to make efforts to solve its balance of payments difficulties and to describe the general economic policies that it proposes to follow. Prior actions may be required where warranted.’
In February 2020 before the coronavirus pandemic hit Swaziland the IMF reported the kingdom’s economy continued to be in free-fall. Public debt was still rising, domestic arrears had grown, and international currency reserves had fallen ‘below adequate levels’.

The IMF reported, ‘Economic indicators are expected to remain weak. GDP growth [the total value of goods and services in the kingdom] is projected to temporarily pick up in 2020, as the government plans to repay some arrears, but growth would be subdued afterwards as fiscal imbalances persist and the private sector remains hamstrung.’

The IMF predicted the government’s deficit was expected to remain large and public debt would rise to above 60 percent of GDP over the medium-term and contribute to further reduce international currency reserves.

See also

IMF reports Swaziland public debt rising, foreign reserves fallen ‘below adequate levels’

Swaziland hospitals close to overwhelmed by coronavirus, says Heath Minister

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