Front Matter Page
IMF Country Report No. 20/229
THE KINGDOM OF ESWATINI
REQUEST FOR PURCHASE UNDER THE RAPID FINANCING INSTRUMENT—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR THE KINGDOM OF ESWATINI
July 2020
In the context of the Request for Purchase Under the Rapid Financing Instrument (RFI), the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on July 29, following discussions that ended on July 8, with the officials of the Kingdom of Eswatini on economic developments and policies underpinning the IMF arrangement under the Rapid Facility Instrument. Based on information available at the time of these discussions, the staff report was completed on July 20.
A Statement by the Executive Director for the Kingdom of Eswatini.
Letter of Intent sent to the IMF by the authorities of the Kingdom of Eswatini*
*Also included in Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
PO Box 92780 • Washington, D.C. 20090
Telephone: (202) 623–7430 • Fax: (202) 623–7201
E-mail: publications@imf.org Web: http://www.imf.org
Price: $18.00 per printed copy
International Monetary Fund
Washington, D.C.
© 2020 International Monetary Fund
Front Matter Page
KINGDOM OF ESWATINI
REQUEST FOR PURCHASE UNDER THE RAPID FINANCING INSTRUMENT
July 20, 2020
Executive Summary
Context. The COVID-19 pandemic is having a severe impact on Eswatini’s economy at a time when the country is already facing deep economic challenges, and the government has begun fiscal consolidation efforts. A national lockdown to contain the spread of the virus, disruptions in supply chains, and lower external demand for key exports are curtailing economic activity. While the authorities’ policy response has been timely and proactive, the economic shock and containment policies are triggering a severe recession with significant social costs, and have created urgent balance of payments needs. The pandemic is unfolding in a context of high prevalence of HIV/AIDS and a stretched health care system, which increase Eswatini’s vulnerability.
Request for Fund support. The authorities are seeking financial assistance under the Rapid Financing Instrument (RFI) for SDR 78.5 million (100 percent of quota), to address the external financing needs arising from the economic impact of the pandemic. They are also requesting the RFI to be disbursed as direct budget support to back fiscal policies addressing external financing needs. Staff assess that Eswatini meets the qualification criteria and other applicable requirements and supports the request. IMF engagement is expected to play a catalytic role in securing additional financing from Eswatini’s development partners, and the authorities are seeking financing from the World Bank and African Development Bank (AfDB) to cover remaining financing needs.
Policy discussions. The authorities’ immediate priority is to cope with the impact of the pandemic while preserving macroeconomic stability. They have increased health spending, and introduced measures to protect the most vulnerable members of society and support the private sector. In the context of the currency peg, the central bank has reduced the policy rate and increased the provision of liquidity. Beyond the short-term objectives, the authorities remain committed to implement their medium-term fiscal consolidation plan to stabilize public debt and restore external buffers. Moreover, they are pressing ahead with structural reforms to strengthen governance, transparency and accountability, reduce vulnerabilities to state-capture and other forms of corruption, and support stronger growth. The authorities have committed to publish bi-monthly reports on emergency-response spending, procurement contracts, and to undertake and publish the result of an independent audit of crisis-mitigation spending and procurement processes. They will also accelerate public financial management (PFM) reforms, including the implementation of the 2017 PFM law and public procurement.
Approved By
David Robinson (AFR) and Bjoern Rother (SPR)
An IMF team comprising Mr. G. Palomba (Head), Ms. P. Ganum, and Messrs. A. Habib and V. Thakoor (all AFR), and Mr. K. Eckhold (MCM) held discussions remotely with Finance Minister N. Rijkenberg, Central Bank of Eswatini Governor S. Sithole, Minister of Public Services C. Ntshangase and other senior government officials on financing under the Rapid Financing Instrument during July 7–8, 2020. Messrs. D. Robinson (AFR), D. Mahlinza, and M. Ismail (both OED) also participated in the policy discussions. Ms. Z. Wang and Mr. H. Alsokhebr contributed to this report.
Contents
CONTEXT
IMPACT OF COVID-19, OUTLOOK AND RISKS
A. Macroeconomic Developments Before the COVID-19 Pandemic
B. Economic Impact of COVID-19
C. Medium-Term Outlook and Risks
POLICY DISCUSSIONS
A. Managing the Pandemic and Protecting Social and Macroeconomic Stability
B. Safeguarding the Peg and Financial Stability
FUND SUPPORT UNDER THE RAPID FINANCING INSTRUMENT
STAFF APPRAISAL
BOX
1. Authorities’ Response to the COVID-19 Pandemic
FIGURE
1. Macroeconomic Effects of the COVID-19 Pandemic
TABLES
1. Selected Economic Indicators, 2017–25
2. Fiscal Operations of the Central Government, 2017/18–25/26 (Emalangeni millions)
3. Fiscal Operations of the Central Government, 2017/18–25/26 (Percent of GDP)
4. Balance of Payments, 2017–25
5. Monetary Accounts, 2017–25
6. Indicators of Capacity to Repay the Fund
7. Financial Sector Indicators, 2011-June 2019
ANNEX
I. Debt Sustainability Analysis
APPENDIX
I. Letter of Intent
Front Matter Page
700 19th Street NW
Washington, DC 20431
USA
