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In the wake of a recent visit to Swaziland by representatives of the International Monetary Fund (IMF), delegation head Jiro Honda has lauded the country’s economic recovery, but warns that its economic challenges remain significant.
Swaziland’s economic growth had recovered since 2011, when it experienced a fiscal crisis following a significant reduction in revenues from the Southern African Customs Union (SACU).
By 2013, economic activity was estimated to have grown by almost 2.75%, while a recent surge in SACU revenue had helped to improve international reserve coverage to about four months of imports by March.
“Swaziland’s challenges, however, remain significant. The recent fiscal crisis points [to] the need to strengthen Swaziland’s resilience to shocks, while the economy has suffered from weak growth performance, which adversely affects social developments.
“Furthermore, there are risks to Swaziland’s economic prospects, as the uncertain global and regional economic outlook could lower SACU revenues. Swaziland’s key economic policy challenges are to strengthen its resilience to exogenous shocks and achieve high, inclusive growth, while meeting critical social and development needs,” Honda said in a statement.
In light of these challenges, he highlighted the need to safeguard the exchange rate peg and encouraged the authorities to maintain a prudent fiscal policy over the medium term, while protecting spending for critical social and development needs.
“Such a prudent fiscal policy stance would help build a sufficient international reserve buffer, maintain modest debt distress and provide Swaziland with better protection for possible shocks,” Honda noted.
He encourages the landlocked State to proceed with wide-ranging structural reforms, including further improving the business climate, facilitating financial intermediation and pursuing land-management reforms.
“To this end, the mission commends the Central Bank of Swaziland’s plan to formulate a financial-sector strategy, with technical assistance from the IMF and the World Bank,” Honda said.
To assist with the implementation of the prudent fiscal policy, the IMF also encouraged the authorities to enhance efforts for public-sector reforms and public financial-management reforms, while welcoming further efforts to enhance tax administration.