Swaziland Pledges Public Service Job Cuts, Below Inflation Wage Increases to Secure IMF Loan

(file photo).

Swaziland (eSwatini) pledged to cut public sector jobs, contain wages and award below inflation salary increases in order to get a loan from the International Monetary Fund.

These were some of the pledges made that included cutting public spending. Some personal taxes and VAT (Value Added Tax) would rise. Taxes on companies would not be cut.

A loan of US$110.4 million to help fight the coronavirus (COVID-19) pandemic was agreed on 29 July 2020. Swaziland faces an urgent balance of payments crisis.

The loan was the full amount available under the IMF's Rapid Financing Instrument. In a statement last week Neal Rijkenberg, the Swazi Finance Minister, estimated a total of US$207 million was needed to shore up the economy. Swaziland is seeking additional loans from the World Bank and African Development Bank (AfDB).

The job cuts and salary pledges were part of a package of promises set out in a letter dated 20 July 2020 to the IMF jointly signed by Rijkenberg and Majozi V. Sithole, Governor, Central Bank of eSwatini.

In the letter they stated, 'The virus is spreading rapidly, and Eswatini's relatively high HIV/AIDS prevalence and an already pressured health care system exacerbate risks that the pandemic could propagate even faster. To contain the pandemic, the government has swiftly put in place an array of containment measures. It has declared a national emergency and imposed a partial lockdown across the country, including travel bans, closure of schools and universities, and a suspension of all non-essential activities. These measures, combined with a sharp decline in external demand for eSwatini's key exports and spillovers from South Africa, are causing a dramatic fall in economic activity.'

They promised the IMF, 'We will contain public wage spending, continuing our policies of gradual employment reduction and lower-than inflation salary adjustments. We have commissioned an external review of the extra budgetary sector with the aim of rationalizing spending and transfers to key state-owned entities and merge entities with similar mandates over time.

'We will also continue to pursue new ways to reduce our operational expenditures, and intend to improve the targeting of our main social assistance programs.

'In addition, about 40 percent of our adjustment plan relies on boosting our domestic revenue by broadening tax bases, increasing some tax rates such as personal taxation and VAT, and continuing strengthening tax administration.

'To protect revenue collection, we also commit not to introduce measures that would reduce corporate income tax revenue. This strategy will allow us to broadly preserve capital spending and domestic capital accumulation, and caring more effectively for the most vulnerable members of the society.'

They also pledged, 'The government will intensify reforms to strengthen governance, transparency and accountability, and reduce vulnerabilities to state-capture and other forms of corruptions.'

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