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© 2003 International Monetary Fund

January 2003

IMF Country Report No. 03/21

Swaziland: 2002 Article IV Consultation—Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Swaziland

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2002 Article IV consultation with Swaziland, the following documents have been released and are included in this package:

  • the staff report for the 2002 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on September 20, 2002, with the officials of Swaziland on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on November 13, 2002. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.

  • a staff statement of December 18, 2002 updating information on recent developments.

  • a Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its December 19, 2002 discussion of the staff report that concluded the Article IV consultation.

  • a statement by the Executive Director for Swaziland.

The document(s) listed below will be separately released.

  • Selected Issues and Statistical Appendix

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to

Copies of this report are available to the public from

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Staff Report for the 2002 Article IV Consultation

Prepared by Staff Representatives for the 2002 consultation with Swaziland

Approved by Michael Nowak and Liam P. Ebrill

November 13, 2002

  • The 2002 Article IV consultation discussions were held in Mbabane during September 9–20, 2002. The staff team met with the Ministers of Finance and Economic Planning and Development; the Governor of the Central Bank of Swaziland; other senior officials at the Ministries of Agriculture, Enterprise and Employment, Health, Natural Resources, and Public Services and Information; and representatives of the banking, business, labor, and international communities.

  • The staff team comprised V. Arora (head), L. Erasmus, L. Ricci, M. Vocke, and G. Bagattini (all AFR). Mr. Mamba, Technical Assistant to the Executive Director for Swaziland, participated in some of the meetings.

  • At the conclusion of the previous Article IV consultation on March 20, 2002, Directors noted that economic growth in Swaziland had slowed since mid-2000 and inflationary pressures had picked up. Directors stressed the importance of prudent fiscal policy for reinvigorating growth and strengthening the external position. Directors considered that the key policy challenges were to reduce the high rate of unemployment and widespread poverty, address the HIV/AIDS pandemic, and maintain external viability. They emphasized the need for reorienting public spending toward health and education, and for implementing structural reforms, particularly to enhance the efficiency of the public enterprise sector.

  • Swaziland has accepted the obligations of Article VIII, Sections 2, 3, and 4 of the Fund’s Articles of Agreement and maintains an exchange system free of restrictions on payments and transfers for current international transactions. Swaziland has no outstanding use of Fund resources.

  • Swaziland’s relations with the Fund, including recent technical assistance, are summarized in Appendix I, and its relations with the World Bank Group in Appendix II. Statistical issues are discussed in Appendix III. Weaknesses in the economic statistics continue to hamper policymaking and effective surveillance. Swaziland’s metadata are being prepared in the context of its ongoing participation in the Fund’s General Data Dissemination System (GDDS) Project for Anglophone African Countries, and are expected to be posted on the Dissemination Standards Bulletin Board.


  • Executive Summary

  • I. Background

  • II. Economic Developments

  • III. Report on the Discussions

    • A. Humanitarian Situation

    • B. Economic Outlook

    • C. Macroeconomic Policies

    • D. Structural Issues

    • E. Statistical and Other Issues

  • IV. Staff Appraisal

  • Text Boxes

  • 1. The Food Situation

  • 2. Assessing the Impact of HIV/AIDS

  • 3. Competitiveness and the Real Effective Exchange Rate in Swaziland

  • 4. Economic Integration between Swaziland and South Africa

  • 5. Swaziland Public Service Pensions Fund

  • Tables

  • 1. Selected Economic and Financial Indicators, 1998–2003

  • 2. Summary of Central Government Operations, 1998/99–2002/03

  • 3. Monetary Accounts, 1998–2002

  • 4. Balance of Payments, 1998–2003

  • 5. Indicators of External Vulnerability, 1998–2002

  • Figures

  • 1. GDP Growth, 1997–2001

  • 2. Central Government Operations, 1997/1998–2001/2002

  • 3. Consumer Price Inflation

  • 4. Nominal (NEER) and Real (REER) Effective Exchange Rates

  • 5. Balance of Payments, 1997–2001

  • Appendices

  • I. Relations with the Fund

  • II. Relations with the World Bank Group

  • III. Statistical Issues

  • IV. Medium-Term Scenarios

  • V. Social and Demographic Indicators

Executive Summary

  • Swaziland’s socioeconomic situation remains serious, with a food shortage and the spread of HIV/AIDS exacerbating the already severe impact of high unemployment, income inequality, and poverty. Over one-fourth of the population is likely to need emergency food assistance by the end of 2002 and over a third of the adult population is infected with HIV/AIDS.

  • Economic growth continued to fall in 2001, to 1¾ percent, while inflation picked up to 12 percent (12-month basis) as of July 2002. The fiscal balance deteriorated further in 2001/02 (fiscal year), mainly due to weak Southern African Customs Union (SACU) receipts and higher capital expenditure. Imports fell as a result of weak economic activity, but the impact on the current account was offset by lower foreign income and transfers. International reserves declined somewhat in relation to imports, but external debt and debt-service obligations remain relatively low.

  • The main near-term problem is the humanitarian situation. The authorities have made progress in organizing food imports and strengthening the anti-HIV/AIDS effort, but they will need help in terms of foreign assistance. However, in the context of the political background and policy orientation, donor sentiment is relatively unfavorable. An urgent reorientation of policies to show a clear focus on the humanitarian situation would have both a direct effect on social outcomes and improve donor sentiment.

  • The fundamental policy challenge is to address the factors that are holding down Swaziland’s longer-term growth prospects and preventing a sustained, broad-based increase in living standards. In this context, there is a need to reduce the fiscal deficit (projected at nearly 4 percent of GDP, including grants, in 2002/03), in order to restore macroeconomic stability and prepare to withstand prospective medium-term pressures. At the same time, spending needs to be reoriented toward critical social sectors.

  • Swaziland’s banking sector is reasonably well developed, but the Swaziland Development and Savings Bank (SDSB) remains a source of concern, notwithstanding its recapitalization from the budget in 2001.

  • There is a need to improve economic data for the purposes of economic policy making and effective surveillance. In this context, the authorities’ participation in the IMF’s General Data Dissemination System (GDDS) Project for Anglophone African Countries since 2001 is very welcome.

Swaziland; Selected Economic and Financial Indicators, 1999–2003

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Sources: Swazi authorities; and staff estimates and projections based on current policies.

Fiscal year (April-March).

Including transfers.

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December 18, 2002

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Public Information Notice (PIN) No. 02/137


December 23, 2002

International Monetary Fund

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December 18, 2002

    Key Points

  • Swaziland is facing a serious humanitarian crisis affecting the entire Southern African region with a food shortage affecting a growing number of the population aggravated by poverty, HIV/AIDS high unemployment and income inequality.

  • Economic growth continues to fall exacerbated by deteriorating fiscal and external sector outlook.

  • Need to reorient and restrain government expenditure towards the worsening humanitarian crisis and social sectors whilst attempting to gunner for macroeconomic stability and sustained economic growth.

Swaziland: 2002 Article IV Consultation-Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Swaziland
Author: International Monetary Fund