Budget could address King’s directives

MBABANE – Things are looking good! Following recent developments in the country’s economic growth, it is anticipated that the budget speech to be delivered by Minister of Finance Neal Rijkenberg will be a bag of good news.

It is also anticipated that the budget will not only be higher than what he presented last year, but will also accommodate some of the directives issued by His Majesty King Mswati III both during the Sibaya People’s Parliament and the Official Opening of the First Session of the 12th Parliament, where he delivered the Speech from the Throne.

Factors that could contribute to the budget having positives include the country’s great strides remarkably made to address the fiscal challenges that featured in the minister’s maiden 2019 budget speech. At that time, as per the contents of the speech, the country’s economic situation remained daunting, revenues remained under pressure and the expenditure had ballooned, while the public finances remained unsustainable. Also, arrears had been accumulating and reserves depleted.

In that particular year, in own words, the minister acknowledged that the economy had stagnated and the country was failing to attract investment, as the gap between the rich and poor continued to grow. As a result of the challenges, the budget stood at E22.9 billion.

The following year (2020), the budget continued to focus on building a resilient economy through fiscal consolidation and the minister have a hint that the country was starting to see positive signs of growth. This was because government had introduced measures to rationalise expenditures and made unavoidable sacrifices to ensure long term growth and fiscal sustainability. The positive signs were reflected in wages and salaries which had been stagnated while budgets and overall spending had decelerated.

As a result, the budget was set at E24.1 billion. During his third term in office (2021), the country, just like the rest of the world, was trying to adjust to what was to become one of the worst disasters-the COVID-19 pandemic. This virus had caused tragic loss of life and the various lockdowns, and limits on economic activities to curb the spread of this disease, had caused immense economic hardship.

However, government was able to successfully secure budget support to aid the country, something which was instrumental in easing the pressure on cash flows and allowed government to substantially reduce arrears over the last year. The budget was set at E24.01billion. The year 2022 on the other hand was a period where the country had just witnessed a disproportionate social and economic burden, due to the third and fourth waves of this global pandemic, but it also suffered the tragic loss of life, and destruction of property, from unprecedented domestic civil unrest.

As a result, it was a time where the country was adapting to the return to normalcy and the citizens had accepted the importance of taking vaccines. It was no surprise that the theme for the budget of the 2022/23 financial year was focused on a transformation through economic stability.

The national budget was set at E23.2 billion. For the financial year 2023/2024, the minister’s speech was motivated by the Speech from the Throne, where the King gave words of encouragement and hope by declaring that it was a year of turnaround for the nation, away from the challenges of the previous two years.

In his opening remarks, the minister spoke strongly about the need for an immediate end to violence. “We need an uninterrupted period of peace and stability to ensure that all emaSwati can safely and meaningfully contribute to this process. Unless this is achieved, we will continue to fail to thrive as a nation and as an economy,” the minister said.

On note is that this time around, the minister announced a record Southern African Customs Union (SACU) receipts and presented a record and fully-funded budget which stood at E26.4 billion.

Based on the trends of the past five years since Rijkenberg was appointed, it is likely that this year’s budget speech will be similar to his third one which he delivered on February 26, 2021, where there were positives. In his preamble in 2021, the minister recounted how the two previous ones started with bad news and that for the first time after two years in office; he had the privilege of starting his speech by reporting on the progress we have made. This was the year where the minister highlighted how government had spent the previous two years fixing the foundations, creating fiscal space through greater efficiencies in spending, without resorting to significant increases in taxes, ballooning arrears or deficits.

He also proudly mentioned how in the wake of the pandemic, through the enhanced fiscal space, government had been able to prioritise health expenditure by successfully securing budget support to aid the country through a difficult year. “I can confidently say that for the first time in many years the fundamentals of our economy are slowly but steadily improving. However, while we are busy fixing our fundamentals, we must acknowledge that there is yet a mountain to climb. We entered the COVID-19 pandemic from an already deteriorating macro-fiscal position with sluggish growth and waning institutional strength,” the minister said.

LOT OF POSITIVES

It is also likely that this year’s national budget will increase from last year’s. This is because in terms of the economic status of the country, a lot of positives have been recorded. These include the fact that early last month, it was announced that the country would get E11.75 billion in SACU receipts, a major increment from the E5.8 billion received in the previous financial year.

The SACU receipts form one of the country’s major revenue generators after tax collection. Based on the immense increase in the SACU receipts, it is highly anticipated that the budget will increase and this is attributed to aggressive expenditure cuts meant at bringing the fiscus to a sustainable path. Also, the good news of the SACU receipts came at a time when the country had just celebrated the fact that for the first time in years, global provider of credit ratings, research and analysis, Moody’s, had made a decision to move it from a B3 stable rating to a B3 positive one.

Known as the Moody’s Investors Service (MIS), the entity issued a report dated December 1, 2023 and it reflects an upward trend in the country’s efforts to turn the economy around.

In the Moody’s language, a rating outlook may be ‘Positive’, ‘Stable’ or ‘Negative’. A ‘Positive’ outlook indicates the rating may be upgraded; a ‘Stable’ outlook indicates the rating is likely to remain unchanged, while a ‘Negative’ outlook indicates the rating may be lowered. The change in outlook to positive from stable reflects the increased likelihood that fiscal consolidation and strengthening economic activity lead to a sustained improvement in Eswatini’s credit profile, supported by higher SACU revenue.

An economist who spoke to this publication alluded to that it was highly likely that the national budget will show a significant improvement. “The chances are high because of some of the positives that we have witnessed in the past two years. Also, the budget will be higher because there are some critical projects that it has to accommodate, most of which were highlighted by the King,” the economist said.