FISCAL SUSTAINABILITY, WHAT’S THE RIGHT BALANCE?

THE country has less than five years to take meaningful strides towards Vision 2022.

The commitment to Vision 2022 is about creating a vibrant economy that can finance government’s wallet (the G-wallet) to implement a productive and sustainable composition of public expenditures that cut out waste and invest in the declared social objectives of our National Development Strategy (NDS).

Fiscal sustainability speaks to the affordability of government taxation and spending programmes, and whether these current spending and investment activities can be maintained/supported without major adjustments on some of the liabilities or promised expenditures in the future.

Currently, the fiscal position presents a debilitating challenge to the promise of a First World and macroeconomic stability. Government is facing serious financial constraints with Southern African Customs Union (SACU) receipts barely enough to cover the public sector wage bill, among other pertinent government expenditures. Due to the cash flow challenges, government arrears tend to increase with serious ramifications on the private sector and the economy as a whole.

The key problem is that the country’s economy has been on a declining trajectory since the 1990s: Average per capita Gross Domestic Product (GDP) fell from 4.79 per cent in the 1980s, to 2.49 per cent in the 1990s, and for the period 2001-10, the country has been growing only by 2.7 per cent a year on average relative to 5.7 per cent for sub-Saharan countries within the region. Following the 2008 Global Financial Crisis, the country slipped further into a fiscal crisis in 2010/11 grinding the economy to almost a screeching halt of just 1 per cent growth rate in 2011, and a further decline to 0.7 per cent in 2012. Not surprisingly, government was not able to generate enough revenue to meet its financial obligations. For the first time in 2011, the risks associated with the over-dependency on SACU revenue inflows became clear as government payment arrears accumulated to more than 5 per cent of GDP in 2011.

Currently economic growth remains subdued slowing down from 1.7 per cent to an estimated -0.6 per cent in 2016, mainly due to the severe drought in 2015/16 and fiscal pressures; while prospects will be sluggish in 2017 and 2018. Economic growth is much needed for job creation to tackle chronic unemployment in Swaziland as well as to address the issues of poverty and the HIV/AIDS pandemic.

Therefore, government has a delicate choice to make between tightening up current and future spending to bring the fiscal deficit under control, and reigniting economic growth through structural increase in public spending. In light of the fast approaching 2022, it is vital that the country finds the right balance between making the necessary savings and spending Emalangeni in the ‘right’ kind of social programmes and capital projects to achieve growth for all and growth rates similar to the 1980s above 5 per cent.

Rightfully so, the theme for the outgoing 2016/17 financial year coined in the Budget Speech was ‘Growth for all with all through optimising, innovating, boosting domestic revenue and spending efficiently’.

In addressing this key theme for turning Swaziland’s economy to wealth creation, government pledged to prioritise development programmes in drought mitigation, enhancing human capital, strategic infrastructure expansion and synergizing with the private sector, strengthening all key sectors of the economy for growth, efficiency and optimisation of resource utilisation and combatting corruption.
So where do we start?

The country has to focus on strengthening its resilience to shocks given that SACU revenue will continue to fall, and focus on development programmes that benefit the poor to achieve higher inclusive growth so as to meet the social development needs stipulated in the NDS, Vision 2022. Fortunately, the country has the Economic Recovery Strategy for Accelerated Inclusive and Sustainable Growth in place which provides a guiding framework for resuscitating growth in Swaziland.

Trade, tourism, government spending, agriculture, financial services, ICT, and human capital development and infrastructure are the key priority sectors. One thing is clear, the country needs more jobs and a more efficient and accountable public sector that can deliver the promised vision. The 10-15 years of sluggish growth has resulted in an expansion of poverty and unemployment, which together with the high prevalence rate of HIV/AIDS continues to exert considerable pressure on government resources and ultimately poking holes to the G-wallet. How can both the private and public sector assist government create the much needed jobs and diversify its revenue streams without suffocating the productivity of the economy? This is one of the key questions to interrogate further in the next coming weeks.

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