Abstract
This 2002 Article IV Consultation highlights that real GDP growth for Swaziland fell from 7¾ percent annually during the 1980s to 3¾ percent during the 1990s. In 2001, growth declined further to 1.8 percent, reflecting a fall in export demand associated with the economic slowdown in South Africa, foreign disinvestment in some industries, and poor weather. Economic activity appears to have weakened further in 2002, with manufacturing output showing the effects of additional closures by foreign firms and agricultural output being affected by the drought in the region.
1. This statement reports on information that has been made available since the staff report (SM/02/351, November 14, 2002) was issued. It does not change the thrust of the staff appraisal.
2. Inflation has continued to increase. CPI inflation rose steadily to 12.9 percent (12-month rate) in October, from 11.8 percent in July, largely reflecting rising inflation in South Africa (14.5 percent in October) and higher food prices.
3. On December 2, 2002, Parliament approved supplementary expenditures worth E 282 million (2¼ percent of GDP) for the current fiscal year (April 2002-March 2003). Three-fifths of the supplementary expenditure represents current spending (nearly half of it on grants and subsidies, education, and housing and urban development) and the remainder spending on capital projects (principally a major road project). The Ministry of Finance anticipates that the impact on the central government deficit will be contained by improved fiscal management and tax collection, reductions in nonessential spending, and, as in the past, underspending on investment projects. It expects the deficit in 2002/03 to be 4–4½ percent of GDP, compared with 3.9 percent reported in the staff report. It is hard to make an assessment of the impact of the supplementary expenditures on fiscal prospects, since details were not released on developments in the other elements of the expenditure plan and in revenues, but the effort to bring the budget deficit down to a sustainable level in the medium term will likely be more difficult. This reinforces the need for fiscal discipline in order to restore macroeconomic stability.
4. A final decision has not yet been taken regarding the government’s proposed acquisition of a new airplane for King Mswati III. After parliament voted against the original proposal in October, the government revisited the issue at a parliamentary caucus on November 18. The caucus suspended the acquisition, but asked for more detailed information on the transaction in order to make a final decision. A select committee was appointed and charged with providing the necessary information.
5. Governance issues have come to the forefront recently, particularly in the areas of the law and the independence of the judiciary. The majority of the judges in the High Court resigned on December 1 after the government refused to accept a ruling on the grounds that it undermined the King’s ability to rule by decree. The planned airplane acquisition and the circumstances surrounding the judges’ resignation have triggered protests by the business community and labor unions, who have called for a general strike and mass protests during December 19–20, 2002.