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”.