REVEALED: GOVT SEEKS E1.8BN LOAN

MBABANE – The country is in advanced negotiations to secure a combined loan of about E1.8 billion (USD100 million).

The money shall be sourced from two financiers, which are the African Development Bank (AfDB) and the World Bank. From each entity, Eswatini plans to seek a US$50 million (E879 557 915), which in turn tallies: E1 759 115 830, as per yesterday’s exchange rate of US$ being equivalent to E17.59.

The loans, it has been gathered, are being discussed at various levels and the Ministry of Finance will soon forward them to Cabinet.  This was confirmed by the Minister of Finance, Neal Rijkenberg, who said the country was looking into securing this financial relief. He said the anticipation was that if all fell into place, the loans could be received in the next six months.

Rijkenberg also confirmed that communication between the entities was at advanced stage. He said securing the loans would assist government, as it would clear the arrears, which have made doing business in Eswatini quite expensive. “It will bring relief as the suppliers will be paid on time and get better pricing in goods and services as there will be no prospects of delays,” Rijkenberg said.

Framework

The minister said this was the thinking of the Ministry of Finance at this point and needed to go through Cabinet to get the approvals, as per the legislative framework. It is worth noting that the country has been facing challenges in settling its arrears; in most instances relying on the Southern Africa Customs Union (SACU) receipts.As such, government arrears in 2018 were said to be over E6 billion; however, it has since been minimised to over E1 billion. Despite that the arrears variation has declined, when government is stretched with its resources, the impact of the delays in settling the debts throttles the economy.

A source explained that when government sets its budget for the year, it projected on revenue collections which include the SACU receipts, which are received quarterly, tax collection and other streams of income like fines. The source explained that currently, the demands by the various sectors of government were beyond what was available. He said the demands were in all the sectors government rendered services in and included the payments of grants (elderly, disability, free primary education (FPE) and the orphaned and vulnerable children (OVCs)).

He said there was also the issue of scholarships and ensuring the smooth flow of government operations which needed to be catered for at all instances. Also, it was said all these services needed government to regularly disburse money towards these ensuring that they were flowing without hindrance and when a cash flow crisis ensued, it destabilised these services.Early in the year, government had challenges settling arrears for local private hospitals and doctors as it owed over E220 million for services rendered under Phalala Fund.

This was said to be in addition to arrears of over E480 million which were owed to suppliers and service providers as well. They supposed the debts had accrued in the third quarter of this financial year, as most of the resources needed in the country had been poured towards resuscitating the collapsed health sector.

Challenges

This is because in recent months, government has been settling arrears of the Ministry of Health in ensuring that suppliers were catered for, while also ensuring that there was activity in the economy. The sources proximate the arrears to be in the region of E700 million and claimed that the delay in their payment could lead to long-term challenges. According to the International Monetary Fund (IMF) Article IV Consultation Report, The country’s fiscal position is estimated also to have improved in FY23/24; however, domestic payment arrears persisted.

The report states that the overall fiscal deficit (including SACU receipts) narrowed from 6.2 per cent of gross domestic product (GDP) in the 2022/23 financial year to 1.5 per cent of GDP. However, it was said the structural fiscal deficit (excluding excess SACU receipts) widened from 3.5 to 4.5 per cent of GDP.

“SACU transfers rose from 7.2 percent of GDP in FY22/23 to 12.9 percent of GDP in FY23/24, mostly reflecting an adjustment for past underpayments. Domestic tax revenue (excluding SACU receipts) was 14.3 per cent of GDP. Expenditure was 0.8 per cent of GDP lower than a year before. Current expenditure contracted by 0.7 ppt, reflecting tight controls over the wage bill and spending on goods and services,” reads the report in part.

The report states that arrears increased during the fiscal year, reflecting weak public financial management and liquidity constraints. It was said spending on health and education and pension fund contributions were also affected. The IMF reported that from 5.2 per cent of GDP at end-2022/23 financial year, arrears fell below two per cent of GDP in July 2023 following settlement and reconciliation efforts. “They then rebounded and reached 4.7 per cent of GDP at end-FY23/24; settlement and reconciliation efforts should reduce this stock again.”
It was said close to half of reported arrears related to stalled investment outlays (which do not require payment).

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