Times Of Swaziland: Financial crisis in SD is over - IMF

Financial crisis in SD is over - IMF
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 WELCOME DLAMINI on 07/02/2013 00:00:00


MBABANE – It is now official; Swaziland is out of the financial crisis it had
plunged into since 2010, the IMF has declared.
The E7 billion dividend the kingdom received from the Southern African Customs
Union in the current 2012/2013 financial year is largely credited as being
responsible for the improved fiscal position.
The International Monetary Fund, in its new report on Swaziland, has even noted
that the country’s reserves with the Central Bank were now ‘broadly
adequate’ yet at one point they were reported to be dwindling at an
unprecedented rate.
When the IMF did its assessment, the reserves were at E6.4 billion.
However, the IMF has warned that even though Swaziland was out of the red, the
country still remained at risk mainly due to ‘uncontrolled spending’, a high
public wage bill, a fragile business environment, ‘terms-of-trade shocks’
and the ‘fully open capital account with South Africa’.
Minister of Finance Majozi Sithole has welcomed the IMF assessment, albeit with
a bit of caution.
"The IMF’s argument was that the crisis was caused by decline of SACU receipts
but they have now seen that it has increased and will probably also be the same
the following year. We have no problems with their assessment that we are out of
the crisis. But to us, we are not saying we are completely out of the woods. It
will all depend on how we use the (SACU) receipts. We have to be cautious on
spending," the minister said.
Regarding the country’s reserves, the IMF report, which is titled ‘Restoring
Sustainability in a
Global Environment - Options for Swaziland’, indicates that they are now above
the level used as an international benchmark.
"The fiscal position has improved owing to the windfall transfer from SACU foe
fiscal year 2012/2013 but fiscal imbalances are still present as expenditures
remain high. Fiscal imbalances originate mostly from uncontrolled spending. The
public wage bill, at about 15 per cent of GDP, is one of the highest in
sub-Saharan Africa," the report states.
Further, it reads: "A model-based approach indicates that Swaziland’s level of
gross official reserves is broadly adequate to protect the country against
external shocks. "
The standard measures used to assess the adequacy of reserves are the gross
official reserves as a ratio of months of imports, the ratio of the stock of
short-term external debt by remaining maturity to gross official reserves, the
ratio of gross official reserves to the stock of reserve money and to the stock
of broad money.
"Of these metrics, the most widely used rule of thumb is that a country with a
fixed exchange rate should maintain reserves equal to at least three prospective
months of imports of goods and services. Swaziland’s level of reserves was
above this threshold as of end-October 2012," the IMF says in the report.
When using the model-based approach, that is, reflecting the level of risk of
the different possible sources of balance of payment pressures, the model
reflects that "the minimum level of reserves needed to cover the risk of
potential balance of payments outflows in Swaziland is 17 per cent of GDP (about
E5.1 billion for 2012). At end-October 2012, gross official reserves stood above
this threshold at E6.4 billion, equal to 21 per cent of GDP."
In its conclusion, the IMF report states: "Overall, the immediate risks have
shifted somewhat during the last 12 months, from a pure fiscal crisis, to more
pressing vulnerabilities on Swaziland’s external position and financial
sector."
On these vulnerabilities, Minister Sithole said the IMF based its analysis
purely on hypothetical assumptions with no tangible evidence.
"Hypothetically they said we would be vulnerable in the financial sector but for
years they have been coming to Swaziland and said our financial sector was not
vulnerable. What we are saying is the financial sector is not vulnerable.
"The concern has been on the non-financial sector but we have come up with Bills
that are going to regulate this industry. There is no need to fear anything.
This is just the IMF’s hypothetical analysis and we are saying they should not
be hypothetical," he said.
Evers to pay E360 000 minimum
MBABANE – Civil servants who will take the Enhanced Voluntary Early Retirement
Scheme (EVERS) will each receive a minimum payout of E360 000.
The payment includes an average salary of E120 000 plus a lump sum amount from
the pension fund of E240 000.
This is according to government and IMF staff estimates contained in the latest
report by the latter titled ‘Restoring Sustainability in a Global Environment
- Options for Swaziland’.
The report states that those targeted to take up EVERS ate those who have worked
in the public service for 20 years.
Government is aiming at having 5 000 employees taking up the scheme over a
period of two years.
In 2013/2014, 2 500 employees are envisaged to take up the scheme and the other
half in 2014/2015. The total budget to finance the scheme is E600 million and at
the moment government already has E210m in place.
It is expected that E300m will be spent during each year of the scheme’s
implementation.
Minister of Finance Majozi Sithole said he could not comment much on the
proposed package as the matter was being handled by the Ministry of Public
Service.
However, Evart Madlopha, the Principal Secretary in the Ministry of Public
Service, said he was also not in a position to speak as he had not read the
report.
"Call me on Friday when I would have read the report," he said. Vincent Dlamini,
the Secretary General of the National Public Service and Allied Workers Union
(NAPSAWU) said they would need to know which kind of employee the calculations
were made for before they could rate its suitability or otherwise.
"We need the employer to unpack this and say which positions would be affected
in order for us to make an informed comment," he said.