Wednesday, November 16, 2011

(STICKY) (MnG, AFP) Swaziland's economy near collapse, says IMF

COMMENT - "Swaziland's financial problems stem from a sudden fall in revenue payments from the Southern African Customs Union" - that is because in the name of 'free trade' and 'open markets', there was a change to the SACU revenue formula. According to the US State Department: "Swaziland is a member of the Southern African Customs Union (SACU), with which the U.S. began negotiating a free trade agreement in May 2003." Also read, from The Post: Chikane hopes Free Trade Area will break barriers.

Now the same people are going: oh no, look at the government shortfall, you must privatize! I already wrote about this back in July (see here). Also read: Africa: Swaziland in Crisis as Customs Union Revenue Is Slashed

These are typical TEA Party, Shock Doctrine tactics. First you create a crisis, then you supply the solution, which is always austerity. Cuts to social services, and the selling off of the people's assets, like mines, telcos, and land. This is daylight robbery of the Swazi people. UPDATE: (MAIL & GUARDIAN) Swaziland 'being mortgaged for loan'

Swaziland's economy near collapse, says IMF

Swaziland's economic growth will grind to near zero this year as the government's fiscal crisis rocks banks and private businesses, the International Monetary Fund (IMF) warned on Wednesday.

"The fiscal crisis has reached a critical stage. Government revenue collections are insufficient to cover essential government expenditures," the IMF said after a two-week fact-finding mission to the kingdom. Businesses dependent on government contracts were laying off workers or shutting down, the IMF said, projecting economic growth to slow to 0.3% this year.

Banks are also beginning to feel the pinch, head of mission Joannes Mongardini said, warning of an "outflow of deposits to South Africa" that was contributing to a liquidity problem.

'Financing gap'

"Key social programs, like the fight against HIV/Aids ... are being negatively affected" -- in a nation where one in four people carry the virus, the IMF said.

"Even if the government were to finance just minimal expenditure like wages, there is a significant financing gap that needs to be covered somehow," said Mongardini, who estimated the government's unpaid bills could almost double to $306-million by March.

The international lender in August declared Swaziland's financial reform programme a failure and has refused to extend loans until it reins in spending.

That assessment has made other international lenders reluctant to help Swaziland.

SA's loan

A R2.4-billion loan offered by South Africa in August is in limbo after Swaziland's giant neighbour linked aid to IMF belt-tightening targets.

Recently Swaziland's government has tried to meet some of the IMF's demands but Mongardini called budget cuts tabled last week "insufficient," saying: "Further cuts are needed, particularly on the wage bill."

The government announced on Tuesday that it had raised from banks and parastatals 350-million emalangeni (about R350-million) reportedly needed to pay civil servants but warned that December pay checks could be in jeopardy.

Agence France-Presse reported on Tuesday that Swaziland pulled together enough loans from local banks and private businesses to pay government workers on time this month, a spokesperson said.

The announcement came after emergency to raise the $43-million reportedly needed to pay civil servants.

Extremely vulnerable

Swaziland's financial problems stem from a sudden fall in revenue payments from the Southern African Customs Union but critics of the regime also blame poor economic management and widespread corruption because of the power wielded by Mswati and his inner circle.

In a country where two-thirds of the population live in poverty and one in four adults are HIV-positive, it is extremely vulnerable to the financial squeeze which has had a large impact on basic health and education services.

It has been more than a year since the IMF first advised Africa's last absolute monarchy to slash its public wage Bill and overhaul its poorly managed economy.

Labour unions have joined forces with pro-democracy campaigns and since the beginning of the year have been staging frequent and noisy public protests, objecting to retrenchments and calling for political change.

The ongoing strikes seem to have paralysed the government which has failed to meet the IMF target to cut jobs and, as a result, cannot access emergency donor funding.

Backs to the wall

A plan announced by South Africa in August to lend its landlocked neighbour R2.4-billion appears to be on ice following resistance by Mswati to agree to conditions such as the unbanning of political parties and open dialogue about democratic reform.

Other reported possible bailouts coming from royal families in Kuwait and Qatar also seem to be either on hold or shelved indefinitely.

Pro-democracy protests, which rocked major urban centres and rural areas from September 5 to September 9, were part of a tightly organised series of demonstrations uniting the democratic movements in the cities of Mbabane, Manzini, as well as the rural areas including Siteki.

More than 4 000 participants joined the Swaziland demonstrations each day and parallel protests took place in South Africa, the UK, Denmark and Germany.

Médecins Sans Frontierès said in early September that they were almost out of HIV testing kits. Drug shortages meant many new patients were reportedly not being put on antiretrovirals (ARVs), while those who are already on ARVs were being given only one month's supply at a time.

-- Staff reporter and AFP

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At 7:40 PM , Blogger MrK said...

Africa: Swaziland in Crisis as Customs Union Revenue Is Slashed

* by Mantoe Phakathi (mbabane)
* Tuesday, February 08, 2011
* Inter Press Service

Apart from the looming job losses in Swaziland’s public sector, small and medium enterprises (SMEs) have also warned of retrenchments following the government’s decision to suspend procurement from small businesses.

Workers during a recent protest in Mbabane about the Swaziland government's financial crisis. - Mantoe Phakathi/IPS Workers during a recent protest in Mbabane about the Swaziland government's financial crisis. - Mantoe Phakathi/IPS

The government of the southern African autocratic monarchy has been forced to cut expenditure after its receipts from the Southern African Customs Union (SACU) shrunk with 60 percent.

SACU receipts contribute more than half of the country’s national revenue; due to changes in the revenue formula, Swaziland’s share has dropped from 741 million dollars to 281 million dollars.

The government’s sudden exercise in fiscal discipline comes after recommendations by the International Monetary Fund (IMF) that the government not purchase any new goods and services unless already committed to, postpone all new investment projects, and slow down the implementation of existing ones in line with available financing.


At 6:22 PM , Blogger MrK said...

(Mail & Guardian, SA) Swaziland 'being mortgaged for loan'
LOUISE REDVERS Nov 18 2011 00:00

Swaziland's economy could collapse within six months if drastic steps are not taken to reduce the country's enormous wage bill and address the spiralling deficit, a source close to the Swazi government said this week.

The Mail & Guardian understands that to pay public servants their salaries this month, and to avoid mass protests, the cash-strapped government is borrowing money from private financial institutions and using state assets as collateral.

These desperate measures follow the apparent collapse of negotiations for a R2.4-billion loan from South Africa, which Swaziland is believed to have turned down because it rejects conditions relating to democratic reform.

Failure to comply with the fiscal reform recommended by the International Monetary Fund has also cut off Africa's last absolute monarch from loan support from the World Bank, the African Development Bank and Western donors.

A source close to the government said: "The situation is totally unsustainable. I can't see it lasting more than six months like this. They're basically mortgaging their country for this loan, but once that money is spent, they will have no way to pay it back. We're already seeing humanitarian problems with social grants being cut. It's the HIV patients, the elderly, orphans and vulnerable children who are suffering."

At 6:23 PM , Blogger MrK said...

This week the IMF, after completing a week-long visit to the kingdom, warned that the fiscal crisis had reached a "critical stage".

Mission chief Joannes Mongardini said: "Government revenue collection is insufficient to cover essential government expenditure, including the wage bill. More importantly, key social programmes like the fight against HIV/Aids, free primary education, support for orphaned and vulnerable children and elderly grants are being negatively affected."

The IMF said domestic arrears had ballooned to 5.3% of gross domestic product and the fiscal deficit for 2011-2012 is expected to reach about 10% of GDP, well above the budgeted target of 7.5%.

Mongardini said the arrears are having a negative knock-on effect on Swaziland's small-business sector, with companies dependent on government contracts either retrenching workers or shutting down.

The IMF staff -- who were not given an audience with King Mswati III, who is in seclusion prior to the annual Incwala, or first fruits, ceremony -- have projected GDP growth of just 0.3% this year and Mongardini said the fiscal crisis is creating "liquidity pressure in commercial banks".

Swaziland's fiscal crisis was largely triggered by a fall in revenue from the Southern African Customs Union as a result of the global financial crisis. For more than a year the IMF has been telling the country to reduce its wage bill, which accounts for more than half of government spending, or face dire consequences. But trade unions have refused to accept the cuts and have staged mass action that morphed into pro-democracy protests.

Failure by the government to reduce the wage bill and cut ministerial perks has led to chronic liquidity problems and Swaziland's local currency, pegged to the South African rand, is coming under pressure. Delinking from the rand would lead to a massive hike in import costs and hit the poorest Swazis hardest.

The source said: "What is worse is that there appears to be no clear political will to address the underlying causes of the problem and find long-term solutions."

Government spokesperson Percy Simelane told the M&G: "People are entitled to their opinions, but our country is going through the type of crisis that other countries have gone through before and survived."

The only reason the government borrowed money to pay public service wages this month is because scheduled income has been delayed. "It's our business where we find our money," he said.

This week Swaziland Finance Minister Majozi Sithole told local media that the loan deal from South Africa will soon be signed off. But the South African treasury and the department of international relations and co-operation said they could not confirm whether any progress had been made.

Asked about the loan from South Africa, Simelane said he was not aware of any negotiations between the governments. The arrangement between the central banks is still in ­progress, he said.

At 6:29 PM , Blogger MrK said...

Notice that the writer in the latest article never mentions SACU, or why it no longer supplies 60% of the Swazi state's revenues.

Another economy killed on the altar of privatisation and 'free markets'.


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