HIGH INVESTMENT, EXPANSION IN MINING SECTOR CAN SPUR GROWTH

MBABANE – High capital investment, energy projects and expansion in the mining sector can spur growth but concrete measures and a well-defined investment programme to raise potential growth need to be articulated.

This was the view of the International Monetary Fund (IMF) Mission Chief for Eswatini, Jaroslaw Wieczorek, who was leading the IMF team that visited Mbabane on July 11‒24, 2024, to conduct discussions for the 2024 Article IV Consultation with Eswatini. At the conclusion of the mission, Wieczorek highlighted that Eswatini experienced a strong post-pandemic rebound, but potential growth remains uncertain.  He said the growth was estimated to have reached 4.9 per cent in 2023, driven by exports of sugar and soft drink concentrates, tourism and the communication sector, and was poised to remain in the 4.5 to 5 per cent range in 2024, before returning to its historical average of about 2.5 per cent in the medium term.

Inflation

Wieczorek, further highlighted that inflation in Eswatini has been lower than in South Africa. He said in May 2024, the difference exceeded one percentage point, some of which could be accounted for by administrative prices on utilities and staple goods. Consumer Price Index (CPI) inflation rose to 4.4 per cent year-on-year in June 2024 from its recent lowest point of 3.5 per cent in September 2023. Housing, fuel and power were the largest contributors (1.9 percentage points), while food contributed 0.9 percentage points. Core inflation ran at 3.4 per cent.
He added that record-high SACU revenues have significantly improved the fiscal position, with the deficit expected to narrow to 1.5 per cent of GDP in the financial year 2024/25, but risks remain due to lower SACU receipts in the future, spending pressures and slowing growth. 

He said the staff’s medium-term scenario projects the fiscal deficit to widen and greater expenditure restraint will be needed to cap the deficit at 3.5 per cent of GDP starting in 2025/26 to stabilise the public debt at around 40 per cent of GDP, as is government’s intention. He said the fiscal stance was broadly appropriate, but some key expenditure areas need attention.
The IMF official added that the public sector hiring freeze should end, accompanied by a rationalisation of the public sector to increase productivity and adequately staff key positions, especially in statistics and delivery of social services. He said spending on health and education was critical, but proper spending controls and increased efficiency must accompany additional funding to these areas.

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