Eswatini Should Focus On Reducing Public Wage Bill

By Ntokozo Nkambule

The International Monetary Fund (IMF) says the country’s public wage bill is high in relation to international standards.

This was disclosed by an IMF team led by Todd Schneider. The team has been in the country since February 27, 2023, and is here to conduct discussions for the 2023 Article IV Consultation with a broad range of counterparts from the public and private sectors.

The discussions covered the performance of Eswatini’s economy since the COVID-19 pandemic and the policy challenges that lie ahead.

Schneider in a press briefing held at the Ministry of Finance noted that the country should continue with its fiscal sustainability drive to rebuild external buffers.

“A revised fiscal adjustment plan, linked to a medium-term fiscal framework, is needed to guide year-by-year adjustment. Adjustment should combine expenditure measures—focused on reducing the public wage bill (which is high by international standards) and transfers to public enterprises, and higher revenue by continued progress in tax administration and closing holes in the tax net.”

The IMF applauded the country for its considerable progress when it comes to controlling public finances. Todd, however, observed that Eswatini’s macroeconomic and financial imbalances are a source of vulnerability.

“Eswatini’s risk of sovereign debt distress is high. Public debt remains elevated at 45.5 percent 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 are below three months of import cover. Fiscal and external buffers have fallen as a result, leaving Eswatini less prepared to counter new shocks.”

Furthermore, the IMF team noted that the country’s outlook is positive but subject to positive numerous downward risks.

“Real GDP growth in 2023 is projected to rise to 3.2 percent supported by agricultural production and manufacturing, and higher government capital spending. Inflation is expected to stabilize at around 5 percent. 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” notes the IMF team.

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