Front Matter Page
IMF Country Report No. 14/223
KINGDOM OF SWAZILAND
2014 ARTICLE IV CONSULTATION—STAFF REPORT; AND PRESS RELEASE
July 2014
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 2014 Article IV consultation with the Kingdom of Swaziland, the following documents have been released and are included in this package:
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on a lapse of time basis, following discussions that ended on May 12, 2014, 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 June 25, 2014.
An Informational Annex prepared by the IMF.
A Press Release
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©2014 International Monetary Fund
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KINGDOM OF SWAZILAND
STAFF REPORT FOR THE 2014 ARTICLE IV CONSULTATION
June 25, 2014
Key Issues
Setting: Swaziland has gradually recovered from the fiscal crisis of 2010–11, buoyed by the improved revenues from the Southern African Customs Union (SACU). Growth modestly recovered, and international reserves rebounded. Swaziland’s challenges, however, remain significant, in view of its high vulnerability to exogenous shocks and its sluggish growth performance, while facing significant social and development challenges with high unemployment and the prevalence of HIV/AIDS. Swaziland now stands at a critical juncture to strengthen its resilience to exogenous shocks, address its weak growth performance, and meet critical social and development needs.
Outlook and risks: Under the status-quo policies, the outlook is for continued sluggish growth and increasing fiscal and external imbalances, reflecting low private investment, elevated government spending, and prospective decline in SACU revenues. Risks are associated with the high volatility of the SACU revenues, possible negative spillovers from South Africa (including higher policy rate and lower growth), and uncertain prospects for preferential trade agreements with the U.S. and EU.
Strengthening Resilience to Shocks: Over the medium term, international reserves should be targeted at five to seven months of imports, and public debt be kept below 30 percent of GDP. This calls for a prudent fiscal policy stance, with fiscal deficit below 2 percent of GDP.
Raising growth: It is essential to enhance the efficiency of the public sector and promote private sector-led growth through structural reforms including improving business climate and accelerating land reforms.
Maintaining financial stability: Financial soundness indicators are generally strong. The strong growth of the nonbank financial sector in recent years calls for strengthening of supervision and regulation for the sector.
Past advice: There is broad agreement between the Fund and the authorities on macroeconomic policy and structural reform priorities. With the authorities’ fiscal consolidation efforts and the improved SACU revenues, fiscal and external sustainability is being restored, consistent with staff’s advice. However, progress on structural reforms—including re-launching the privatization process, improving access to modern finance and improving the business climate—has been modest.
Approved By
Discussions took place in Mbabane April 28–May 12, 2014. The team comprised Messrs. Honda (head), Wu, Torres, and Ms. Jirasavetakul (all AFR). Ms. Dlamini-Kunene (OED) and Mr. Im (the World Bank) also participated in the meetings. Ms. Robertson provided excellent editorial assistance.
Contents
RECENT DEVELOPMENTS, OUTLOOK, AND RISKS
A. Recent Economic Developments
B. Development and Social Challenges
C. Outlook and Risks
POLICY DISCUSSIONS
A. Strengthening Resilience to Exogenous Shocks
B. Raising Growth Potential and Creating Jobs
C. Other Surveillance Issues
STAFF APPRAISAL
BOXES
1. Public Sector Wage Increases and Planned Public Sector Reforms
2. Groundwork for Successful Fiscal Rules
FIGURES
1. Improving Economic and Financial Conditions since the 2010–11 Fiscal Crisis
2. Social Developments
3. Recent Macroeconomic Performance and Outlook
3. Recent Macroeconomic Performance and Outlook (concluded)
4. GDP Growth and Private Sector Investment
TABLES
1. Risk Assessment Matrix
2. Selected Economic and Financial Indicators, 2012–19
3. Fiscal Operations of the Central Government, 2010/11–19/20
4. Fiscal Operations of the Central Government, 2010/11–19/20
5. Monetary Accounts, 2011–19
6. Balance of Payments, 2011–19
7. Millennium Development Goals, 1995–2013 or Latest
8. Financial Sector Indicators, 2009–13
APPENDICES
I. Exchange Rate Assessment
II. Adequate International Reserves
III. Debt Sustainability Analysis
IV. Fiscal Multiplier in Swaziland
V. Causes of Low Private Sector Investment
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KINGDOM OF SWAZILAND
STAFF REPORT FOR THE 2014 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
June 25, 2014
Prepared By
Staff of the International Monetary Fund in Consultation with the World Bank.
Contents
RELATIONS WITH THE FUND
BANK-FUND JOINT MANAGEMENT ACTION PLAN
STATISTICAL ISSUES
SOCIAL AND DEMOGRAPHIC INDICATORS
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Press Release No. 14/353
FOR IMMEDIATE RELEASE
July 18, 2014
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