World Bank approves E1.1bn economic recovery loan
MBABANE – With the fiscal challenges faced by the country, the World Bank has approved a loan to accelerate post-COVID-19 economic recovery.
The loan will assist government and its stakeholders to source out funds for construction projects as well as aid to businesses that were affected and still struggling to recover.
The World Bank Group has approved a US$75 million (E1 159 450 500) loan for the Government of the Kingdom of Eswatini.
This was mentioned by the World Bank in a statement released this past month and was also stated by the government of Eswatini in their weekly gazette.
The government said the loan came into Act on Friday last week when the gazette was released.
Agreement
The Ministry of Finance was authorised by government to enter into a loan agreement with the World Bank to finance reconstruction and development.
According to government, the loan shall be paid in 16 consecutive semi-annual instalments after a grace period of five years, which shall be calculated from the first day of the month following the first withdrawal from the loan account.
“The government shall pay the World Bank at an interest rate equal fixed at 0.65 per cent per annum,” said the government through the gazette brief.
The government is also expected to pay E2 898 626.25, which is the front end fee for the loan amount.
They will also pay a commitment charge of 0.25 per annum on the un-withdrawn loan balance.
The government said the loan shall be used to finance projects.
“Any money received in respect of the loan shall be paid into the Consolidated Fund and form part of that fund,” said government.
They also said if not used by the Consolidated Fund, it will be taken into some other public fund existing or created for the purpose of the loan as determined by the Ministry of Finance.
Worth noting, the current threshold of government debt is at 54.5 per cent as announced by the Central Bank of Eswatini (CBE).
Approval
Following the approval of the loan, it will increase and if it reaches 60 per cent, the country’s economy will be affected.
World Bank Country Director for Eswatini, Botswana, Lesotho, Namibia and South Africa Marie Francoise Marie-Nelly said the Economic Recovery Development Policy Loan II is the second in a programmatic series of two operations to support Eswatini’s economic reform program and generate a sustainable recovery.
She said programme supports Eswatini’s post-COVID-19 economic recovery programme and its efforts to implement critical structural reforms to strengthen the management and governance of public finances, improve transparency and accountability in the public sector, and facilitate the development of the private sector.
“More importantly, the programme will help improve the lives of the poor and vulnerable by supporting policy and institutional actions that not only protect lives and livelihoods, but generate economic opportunities for people and promote better public service delivery.”
“The reforms supported by this operation are pro-poor and will contribute to poverty reduction and positive social impacts in the short to medium term”, said Marie Francoise Marie-Nelly.
Crisis
She added that it would help Eswatini to build back better by focusing on people who have been hardest hit by the recent series of crisis and by addressing structural issues that were holding back Eswatini well before the COVID-19 pandemic.
Continuing to support the governance and transparency agenda through this operation will contribute to building citizen trust and public-private collaboration.
She said to deepen and advance reforms initiated under the first Development Policy Loan, which was approved in 2020, the programme aims to stabilise the country’s fiscal position, improve competitiveness, and support economic recovery, while at the same time supporting policy responses to strengthen the health system and mitigate the impact of the COVID-19
pandemic on the poor and vulnerable.
Nelly also mentioned that specific measures to strengthen transparency, accountability and efficiency of public spending include the creation of a single government treasury account to ensure sustainability of fiscal discipline, the modernisation of the public procurement strategy, including through the use of e-GP system, and the adoption of the state-owned enterprise (SOE) framework to streamline and improve the performance of SOEs which at present represent a substantial drain on public resources while constraining the growth of the private sector.
Arrears
Minister of Finance Neal Rijkenberg afore said Tax arrears in Eswatini have increased by 29 per cent to E9.369 billion from E7.262 billion in 2020/21.
He said domestic revenue collections in 2021/22 were 10 per cent below estimates which was about E1.235 billion.
“In line with the weaker than expected revenue collection, domestic taxes to GDP ratio has declined by 0.3 percentage points in 2021/22 to reach 14.9 per cent,” said the minister.
The minister further mentioned that the increase in tax arrears is a concern for the Eswatini Revenue Service (ERS) and government and the introduction of the Tax Debt Relief Programme is one of their efforts to contain the increase that has averaged 25.1 per cent per year.