Times Of Swaziland: FISCAL CHALLENGES HINDER ECONOMIC GROWTH

FISCAL CHALLENGES HINDER ECONOMIC GROWTH
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Nhlanganiso Mkhonta on 20/02/2025 07:57:00


MBABANE - Eswatini’s economic growth remains sluggish, with the country facing
structural inefficiencies, fiscal imbalances and low private-sector investment.
A new World Bank report highlights the key challenges and offers policy
recommendations to improve economic resilience and long-term sustainability. The
report notes that Eswatini’s economy, once growing at an impressive 8 per cent
per year before 1994, has since struggled, averaging just 2.8 per cent annually,
between 1996 and 2020.
This decline is attributed to reduced private investment, inefficient fiscal
policies and increasing reliance on government spending. The fiscal deficit has
been a persistent issue, driven by fluctuating Southern African Customs Union
(SACU) revenues, rising public debt and mounting expenditure arrears. One of the
major concerns is Eswatini’s weak public financial management. The report
points out that excessive government spending, particularly on wages, has
crowded out private-sector investment.
Compounds
The public sector wage premium is approximately 50 per cent, making it difficult
for the private sector to compete in attracting talent. Furthermore,
Eswatini’s export market remains narrow, relying heavily on South Africa and
Mozambique. The lack of trade diversification and limited foreign direct
investment (FDI) opportunities continue to restrict growth. The country’s
landlocked status further compounds logistical challenges, necessitating better
infrastructure investment and digital connectivity.
Speaking at the launch of the report, Minister for Finance Neal Rijkenberg
underscored government’s commitment to fiscal reforms and improving economic
management. Rijkenberg acknowledged that stabilising revenue streams while
promoting competition and market contestability remains a priority. He noted
that his recent budget speech incorporated several of the report’s
recommendations, aligning them with the country’s current economic challenges.
One of the key focus areas for the Ministry of Finance has been strengthening
Public Financial Management (PFM). Rijkenberg emphasised that the implementation
of the Integrated Financial Management Information System (IFMIS) is a critical
step toward improving budgeting processes and addressing longstanding PFM
inefficiencies. Additionally, he reaffirmed government’s commitment to
resolving expenditure arrears, highlighting  Cabinet’s adoption of annual
audits and the transition to an accrual-based accounting system in line with
International Public Sector Accounting Standards (IPSAS).
The minister also revealed that a review of the Public Procurement Act of 2011
is underway, with the aim of modernising procurement processes. Government has
invited public input on the revision of the Act to improve procurement
practices, enhance accessibility, expand electronic procurement (E-GP) coverage
and strengthen supplier registration mechanisms. “I wish to reiterate that the
Ministry of Finance welcomes this Public Finance Review report. It really
provides an opportunity for us to conduct deeper analysis and explore various
reform options,” he added.
Competitiveness
In conclusion, Rijkenberg stressed that implementing the report’s
recommendations will further strengthen Eswatini’s fiscal position, allowing
the government to leverage fiscal policy as a tool for macroeconomic stability
and enhanced external competitiveness.“Let us work together to build a more
resilient and sustainable economy for Eswatini,” he concluded.
Government’s Fiscal Adjustment Plan (FAP), introduced in 2020, aims to reduce
deficits through revenue generation and spending cuts. However, implementation
has been slow, and external shocks such as the COVID-19 pandemic have further
delayed progress. Without urgent policy reforms, the country risks prolonged
economic stagnation.