Lost king­dom

Finweek English Edition - - Economic trends & analysis - HOWARD PREECE

SWAZI­LAND’S ECON­OMY has been clearly hurt by the ex­ces­sive strength of its cur­rency – the lilan­geni – on the back of the strong rand.

That’s the find­ing of the ex­ec­u­tive board of the In­ter­na­tional Mone­tary Fund.

How­ever, there was lit­tle that the king­dom, one of South Africa’s small neigh­bour­ing states, could do di­rectly about that. Swazi­land has a fixed ex­change rate with the rand, as do Namibia and Le­sotho. Botswana takes di­rect re­spon­si­bil­ity for its cur­rency – the pula – but ex­port re­sources (es­pe­cially di­a­monds) and the long record of eco­nomic suc­cess to­gether make that pos­si­ble.

Swazi­land, which re­lies ap­pre­cia­bly on trade with and tourism from SA, sim­ply isn’t in a po­si­tion to “go it alone” on that front. In any case, the lilan­geni is far from Swazi­land’s only ma­jor eco­nomic prob­lem. The IMF says: “The coun­try’s eco­nomic per­for­mance has re­mained weak, with an­nual growth av­er­ag­ing only 2% since 2000.

“This fol­lows sub­stan­tial ap­pre­ci­a­tion of the cur­rency dur­ing 2002-2004, ero­sion of trade pref­er­ences, re­cur­rent drought and stag­nant fixed in­vest­ment.”

The IMF adds: “Over that same pe­riod ris­ing gov­ern­ment ex­pen­di­tures, es­pe­cially on the wage bill, un­der­mined fis­cal sus­tain­abil­ity and re­duced for­eign ex­change re­serves to crit­i­cally low lev­els. Poverty has es­ca­lated in the face of ris­ing un­em­ploy­ment, food short­ages and the world’s high­est HIV/Aids in­fec­tion rate.”

The IMF ad­vises Swazi lead­ers to bring about “fis­cal re­forms to safe­guard macroe­co­nomic sta­bil­ity and to help pre­serve the cred­i­bil­ity of the peg to the rand, which con­tin­ues to be ap­pro­pri­ate given Swazi­land’s close in­te­gra­tion with the SA re­gion”.

The IMF urges Swazi­land “to use the op­por­tu­ni­ties pro­vided by the tem­po­rar­ily higher SA Cus­toms Union rev­enues to move ahead ex­pe­di­tiously with fis­cal re­forms, in­clud­ing right-siz­ing the civil ser­vice to lower the wage bill, im­prov­ing rev­enue ad­min­is­tra­tion, in­tro­duc­ing VAT and tight­en­ing ex­pen­di­ture”.

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