Restoring Sustainability in a Changing Global Environment: Options for Swaziland
Departmental Papers, February 1, 2013
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- Restoring Sustainability in a Changing Global Environment: Options for Swaziland
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Bibliographic details
- Authors: Olivier Basdevant
- Published: February 1, 2013
- Series: Departmental Papers
- DOI: https://doi.org/10.5089/9781475589412.087
Country overview
- Population: 1.1 million people.
- Geography and economic structure:
- Landlocked; borders Mozambique and South Africa.
- Economy heavily dependent on concentrates, sugar exports, and tourism.
- More than 80 percent of imports originate from South Africa.
- Member of the Southern African Customs Union (SACU).
- Currency and monetary arrangements:
- The lilangeni is pegged at parity with the South African rand under the Common Monetary Area.
- The rand is also legal tender in Swaziland.
Fiscal developments and arrears
- Large fiscal deficits in recent years:
- Deficits of 13.4 and 6.0 percent of GDP in 2011/12 and 2012/13, respectively.
- Consequences of the deficits:
- Significant drawdown of gross official reserves at the central bank.
- Significant domestic borrowing.
- Accumulation of domestic payment arrears, estimated at E 1.6 billion (5.4 percent of GDP) at end-March 2012.
- Composition of arrears:
- Pension funds and government suppliers each account for about 40 percent of the total stock of arrears.
- Measures taken to address arrears:
- Arrears reduced by E 250 million as of end-September 2012 through use of windfall revenue.
- An additional E 720 million in arrears to the public pension fund have been restructured into a three-year loan.
SACU transfers and fiscal space
- SACU transfers usage and evolution:
- SACU transfers increased from about 10 percent of GDP in 2011/12 to 22.5 percent in 2012/13.
- The windfall revenue was used to repay an advance taken by the central bank and to reduce arrears.
- Effect on fiscal and external sustainability:
- Higher SACU transfers improved external balances by reducing the current account deficit and increasing central bank reserves.
- Some fiscal space was regained due to the sharp increase in SACU transfers.
External balances, reserves, and growth outlook
- Central bank reserves:
- Reserves were E 6.0 billion (3.1 months of imports) at end-November 2012.
- This represents a significant improvement from E 3.7 billion recorded at end-March 2012.
- Growth projection and constraints:
- Real GDP growth is projected to contract by 1.5 percent in 2012.
- Contraction drivers include accumulated arrears, stagnant credit to the private sector, and weak confidence in Swaziland fiscal and external sustainability.
Key statistics (extracted)
- Population: 1.1 million people.
- Deficits: 13.4 percent of GDP (2011/12); 6.0 percent of GDP (2012/13).
- Domestic payment arrears: E 1.6 billion (5.4 percent of GDP) at end-March 2012.
- SACU transfers: about 10 percent of GDP (2011/12) → 22.5 percent of GDP (2012/13).
- Arrears reduction: E 250 million as of end-September 2012.
- Pension fund arrears restructured: E 720 million into a three-year loan.
- Reserves: E 3.7 billion at end-March 2012; E 6.0 billion (3.1 months of imports) at end-November 2012.
- Real GDP growth projection for 2012: contraction by 1.5 percent.
Restoring Sustainability in a Changing Global Environment: Options for Swaziland, Departmental Paper No 2013/001, Olivier Basdevant (February 1, 2013).