Kingdom of Swaziland: Staff Report for the 2007 Article IV Consultation Informational Annex
Author: International Monetary Fund
Publication Date:
03 Mar 2008
eISBN:
9781451836134
Language:
English
Keywords:
ISCR; CR; Swaziland; SACU revenue; exchange rate; government; banking soundness indicator; IBRD terms; HIV prevalence rate; intervention currency; GDP estimate; adult literacy rate; Government finance statistics; Consumer price indexes; Balance of payments statistics; Monetary statistics; Africa; prevalence rate
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The Swazi economy has continued to register sluggish economic activity even as rising Southern African Customs Union revenue contributed to a large fiscal surplus and accumulation of international reserves. The unchecked growth of insufficiently regulated saving and credit cooperatives poses risks to the financial system. Fiscal policy should safeguard priority spending and fiscal sustainability. Executive Directors commend the government’s effort in rebuilding international reserves. Further efforts are needed to improve the quality and timeliness of data to better facilitate policy formulation and monitoring.

Abstract

The Swazi economy has continued to register sluggish economic activity even as rising Southern African Customs Union revenue contributed to a large fiscal surplus and accumulation of international reserves. The unchecked growth of insufficiently regulated saving and credit cooperatives poses risks to the financial system. Fiscal policy should safeguard priority spending and fiscal sustainability. Executive Directors commend the government’s effort in rebuilding international reserves. Further efforts are needed to improve the quality and timeliness of data to better facilitate policy formulation and monitoring.

I. Swaziland: Relations with the Fund

(As of January 3, 2008)

I. Membership Status: Joined September 22, 1969; Accepted the obligations of Article VIII, sections 2, 3 & 4: December 11, 1989.

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans: None

V. Financial Arrangements: None

VI. Projected Payments to the Fund:

(SDR Million; based on existing use of resources and present holdings of SDRs):

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VII. Implementation of HIPC Initiative: Not applicable

VIII. Exchange Rate Arrangement

The lilangeni (plural: emalangeni) continues to be pegged at parity to the South African rand, which—alongside with the Lilangeni—is also legal tender. The intervention currency is the U.S. dollar; exchange rates for the U.S. dollar are based on the floating middle rate of the South African rand against the U.S. dollar. The rate on December 31, 2007 was E1 = US$0.1469.

IX. Article IV Consultation

Swaziland is on the standard 12-month cycle. The last Article IV consultation discussions were held in Mbabane in November 2006. The staff report (IMF Country Report No. 07/132, March 2007) was considered by the Executive Board on January 31, 2007.

X. Technical Assistance

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II. Swaziland: Relations with the World Bank Group

(As of December 2007)

Since 1962, the World Bank has financed projects in Swaziland in several areas including roads, power, water supply, industrial development, agriculture, education and urban development. Cumulative commitments to date amount to $105 million for twelve IBRD loans and $8 million for two IDA credits.

World Bank’s engagement in Swaziland over the last decade has been fairly limited with only a single loan for an Urban Development Project (US$29 million) which closed in March 2005, achieving its development objectives despite long preparation and implementation delays. Recent assistance has focused on providing policy advice and conducting a range of economic and sector work (ESW). Some recent key pieces of work have included a Public Expenditure Review and Basic Education Review in 2006, Investment Climate Assessment in 2007 and support to fight against HIV/AIDS through an Institutional Development Grant. The Bank is also providing technical assistance to strengthen public expenditure management and macro-economic analysis and has recently launch a Post-Basic Education and Training Sector Study. Finally, the Bank manages Cities Alliance fund for slum upgrading and housing finance activities.

In view of increased interest from the authorities to partner with the Bank Group, the Bank is currently preparing an Interim Strategy that will mark the first country strategy for Swaziland since 1994. The Interim Strategy will provide a framework for Bank’s activities in Swaziland focusing on three strategic areas: (i) Fighting HIV/AIDS; (ii) Improving governance; and (iii) Increasing competition. To implement the strategy the Bank will use a combination of instruments including IBRD loans, grants, ESW and technical assistance. The two proposed IBRD loans are a follow-on to the Urban Development Project—a Local Government project ($20 million, Board in Q4 FY08)—and an HIV/AIDS operation (FY09) where the Bank is looking for ways to soften the IBRD terms, possibly through a blending arrangement. The proposed Interim Strategy will cover a period of 24 months and will be presented to the Board of Executive Director towards the end of March 2008.

IFC: The committed portfolio in Swaziland amounts to $5.32 million with three operations in manufacturing. IFC's top client is Swazi Paper with $4.15 million.

MIGA: MIGA has one project in Swaziland which involves the construction and operation of electricity transmission lines that will interconnect South Africa, Swaziland, and Mozambique. This is MIGA’s first project in Swaziland, for which it has provided coverage to South African investors against the risks of expropriation and war and civil disturbance. As of October 2007, MIGA’s gross exposure was $36.7 million.

III. Swaziland: Statistical Issues

While data provision for surveillance purposes is adequate overall, staff’s analysis was affected by shortcomings in certain areas, including national accounts and external sector. The authorities provide available data to the Fund with a lag of 1 to 2 months, except for the national accounts and international trade data, which are reported irregularly.

GDDS metadata for Swaziland were posted on the Fund’s Dissemination Standards Bulletin Board on February 11, 2003. The metadata for all sectors except the financial sector were updated in October 2005. Swaziland has undertaken to use the GDDS as a framework for the development of its national statistical system and participates in the GDDS Project for Anglophone African Countries. Under this project (funded by the U.K. Department for International Development (DFID), Swaziland is participating in the national accounts and the monetary and financial statistics modules with the Fund, and in the labor statistics and agricultural statistics with the World Bank.

Real sector data

STA GDDS missions have resulted in significant improvements in the national accounts. Current and constant price (base=2000) GDP estimates are now available from both the production and expenditure approaches. Unfortunately, these new estimates have not yet been published, as there are still some shortcomings concerning the treatment of SACU revenue. For national accounts data, AFR missions rely on estimates provided by the Central Statistical Office (CSO). The authorities are planning the first labor force survey with support from the World Bank/GDDS project.

Prices

The consumer price index (CPI) was significantly revised in May 2007. The dissemination of the new consumer price index is a significant milestone for the CSO with technical assistance provided in the context of the GDDS initiative. Four new geographical indices, as well as a national index, with updated market basket weights, are now available. These new consumer price indices incorporate improvements in compilation methodology, market basket coverage, flexibility for introducing new pricing outlets and new varieties of products, and enhanced processing capabilities. Monthly consumer price data are published by the CSO with a one-month lag. For International Financial Statistics (IFS) purposes, the consumer price index is reported at the national level for the all-income group.

Government finance statistics

Fiscal data are provided to AFR staff only during missions and/or following budget announcements. The Central Bank of Swaziland (CBS) reports fiscal data on central government operations to STA for publication in IFS and the GFS Yearbook on an irregular basis and with significant lags—the latest data are for 2003. Data on transactions in financial assets and liabilities are not reported. A June 2003 mission reviewed GFS compilation and introduced the GFSM 2001 framework. An October 2003 mission made recommendations to improve the coverage, classification and consistency of fiscal statistics. A June GFS 2004 mission further developed the bridge tables and derivation tables used to compile GFS, assisted in the reconciliation of the fiscal and monetary accounts, and made recommendations concerning these topics, as well as extra budgetary accounts, the MOF Economic Classification Spreadsheet, budget classification, and data dissemination.

Monetary statistics

The Central Bank of Swaziland (CBS) reports monetary and financial statistics (MFS) to STA regularly, although the timeliness of data could be improved. The 2006 MFS mission noted that substantial improvements were achieved, particularly in the data for the CBS. In contrast, the mission found that, even though some progress had been made in the reporting of data of other depository corporations (ODCs), quality problems remained. The majority of the ODCs reported various degrees of difficulty in providing accurate data to the CBS. The mission recommended that the CBS arrange regular meetings with the ODCs to promote improved classification and sectorization. Furthermore, the institutional coverage of the depository corporations’ survey is limited, as it covers only the CBS and the commercial banks. Recently the CBS has started to include the Swaziland Building Society into the monetary data backdated to December 2006. The credit and savings cooperatives, representing about 12 percent and 8 percent of the deposits of the commercial banks, respectively, are still outside the deposit corporations survey. A recent MFS mission discussed the proper treatment of pension funds and insurance companies in the financial survey.

Balance of payments statistics

The CSO publishes data on foreign trade on a quarterly basis, but the lack of sufficient computer resources results in long lags in the production of trade data, especially regarding imports. AFR missions use trade data provided by the CBS. The CBS publishes balance of payments statistics on a half-yearly and annual basis. It now adheres to a methodology consistent with the fifth edition of the Balance of Payments Manual. Shortcomings in the timeliness and availability of data need to be addressed.

Swaziland: Table of Common Indicators Required for Surveillance

(As of January 3, 2008)

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Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I); and not available (NA).

IV. Swaziland: Social and Demographic Indicators

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Sources: International Financial Statistics; World Bank, World Development Indicators, April 2006, UNAIDS, 2006, 2006 Report on the Global Aids Epidemic; and national authorities. Data refer to 2006, unless otherwise indicated

Swaziland: Tentative Work Program

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Cover IMF Staff Country Reports
The Kingdom of Swaziland: 2007 Article IV Consultation: Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director
Author: International Monetary Fund
Volume/Issue:
Volume 2008: Issue 085
Publisher:
International Monetary Fund
ISBN:
9781451836134
ISSN:
1934-7685
Pages:
52
DOI:
https://doi.org/10.5089/9781451836134.002