MBABANE – International Monetary Fund (IMF) Mission Chief for Eswatini Todd Schneider, says the country’s economy is comparatively resilient through the COVID-19 pandemic.
Schneider had led a team from the IMF, which visited Eswatini from February 27 to March 10, 2023, to conduct discussions for the 2023 Article IV Consultation with a broad range of counterparts from the public and private sector. The discussions covered the performance of Eswatini’s economy since the COVID-19 pandemic and policy challenges lying ahead. Schneider said following a strong rebound of 7.9 per cent in 2021, real Gross Domestic Product (GDP) growth stagnated in 2022, at 0.4 per cent. “This reflects the continued dampening effect from civil unrest, government payment arrears, slowing growth in South Africa, and heavier than normal rainfall and industrial action on the sugar sector,” he said.
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The IMF official highlighted that Eswatini headline inflation rose to 5.6 per cent at the end of 2022 due to higher food and transport prices. He said government fiscal deficit was projected to widen to 5.4 per cent of GDP by the end of the Financial Year 2022-23 in the wake of lower SACU revenue receipts and higher government spending. Schneider said in the balance of payments, the current account balance had shifted to an estimated deficit of about 1.1 per cent of GDP as the trade balance was negatively affected by higher import prices. “Foreign reserves declined to US$449 million, equivalent to about 2.3 months of import cover,” he said. He noted that the near-term outlook was positive, but subjected to numerous downside risks. He said the Real GDP growth in 2023 was projected to rise to 3.2 per cent, supported by agricultural production and manufacturing, and higher government capital spending.
He stated that inflation was expected to stabilise at around five per cent. “SACU revenue transfers are expected to roughly double in FY23-24, facilitating a significant reduction in the fiscal deficit and a modest reduction in the ratio of public debt to GDP,” he added. He also noted that importantly, the Government of Eswatini was establishing the SACU revenue stabilisation fund which, if effectively implemented, should be a significant step forward in managing the swings in SACU revenue transfers and enhancing macro-economic management.
Schneider said, however, downside risks persist, and include volatile international commodity prices, tighter global financial conditions, and slowing growth in South Africa.
The mission chief highlighted that while considerable progress was made on controlling public finances even through the pandemic; Eswatini’s macro-economic and financial imbalances were a source of vulnerability. He said Eswatini’s risk of sovereign debt distress was high. He said public debt remained elevated at 45.5 per cent of GDP, domestic payment arrears (after a sharp reduction in 2021) rose again in 2022 and foreign exchange reserves of the Central Bank of Eswatini were below three months of import cover.