Press Release No. 09/262

Press Release: Statement by IMF Staff Mission to Swaziland

July 16, 2009

An International Monetary Fund (IMF) staff mission led by Norbert Toé visited Mbabane during July 8–16 to review recent economic developments and discuss the impact of the global downturn on the Swazi economy and the authorities’ policy response. The IMF staff met with His Excellency Prime Minister Dr. B. S. Dlamini, Minister of Finance Hon. M. Sithole, Economic Planning and Development Minister Prince Hlangusemphi, Central Bank Governor Dlamini, senior government officials, and members of the donor community and the private sector.

The following statement was issued today in Mbabane by Mr. Norbert Toé, the IMF mission chief for Swaziland:

"Swaziland is being adversely affected by the second round effects of the global economic downturn, albeit to a lesser extent than similar small open economies. Real GDP growth in 2009 is projected to decelerate sharply but remain positive at 0.4 percent, largely on account of a contraction in manufacturing and mining, and a rebound in sugar production. Inflation is projected to decline to single digits as pressures related to food price increases in 2008 subside. Rising transfers from the Southern African Customs Union (SACU) enabled the Central Bank of Swaziland to accumulate international reserves.

"The fiscal position, which recorded a surplus in 2008–09, is expected to swing into a deficit this current fiscal year (April 2009–March 2010) on account of escalating expenditures and a decline in SACU revenue.

"While some fiscal loosening to support domestic demand in the face of the significant weakening of economic activity in Swaziland may be warranted, the mission stressed the need to maintain fiscal sustainability over the medium term through appropriate revenue and expenditure policies. Stepped up domestic revenue mobilization efforts should include fully operationalizing the revenue authority and implementing a value-added tax to broaden the tax base. At the same time, cuts in expenditure will also need to be undertaken while allowing for additional spending on education, health, and other priority programs. Public financial management reforms and the implementation of the government’s civil service reform would be critical to ensuring efficiency in public spending."

“The mission would like to thank the authorities for their excellent cooperation.”