‘E12bn not so much a windfall’
Finance Minister Majozi Sithole has reiterated that receipts of E7.1bn from the Southern African Customs Union (SACU) together with revenue collected internally did not necessarily mean that the country had overcome its financial woes but only that this came as some form of relief.
He was interviewed on Friday following stinging criticism about remarks he made to the effect that he gave the impression that Swaziland’s economic troubles were over.
Sithole said they agreed to meet in December with the Swaziland Revenue Authority (SRA) to confirm domestic collection and that gave relief that the situation had somewhat improved since reserves had increased except for the poor performance of a few public enterprises.
News of a E12 billion windfall invited a barrage of demands for salary increments now that the economy had recovered. Commentators from outside our border, also said the minister’s pronouncements were not in tandem with the obtaining situation on the ground.
He emphasized that Swaziland was not out completely from the economic quagmire but this was an opportunity to use resource sparingly in order for the economy to sustain itself. He further said he was worried about the growth rate, being the lowest in the SACU.
He added that it was now imperative to help the private sector make the environment conducive for better performance. He also expressed his worries on the high unemployment rate. The International Monetary Fund last November noted that the economy continued to suffer the lagged impact from the fiscal crisis of the past two fiscal years, which followed a significant decline in revenues from the Southern African Customs Union (SACU).
The government budget that ended March 31, 2012, registered an overall fiscal deficit of E 1.7 (6.0 percent of gross domestic product—GDP) and domestic government arrears of E1.6 bon (5.1 percent of GDP). The IMF added that faced with unpaid government receivables, many small- and medium-sized enterprises had been forced to cut down their operations.
The international body further said the current fiscal year 2012/13 continued to be challenging for the government. There was a notable increase in government revenue as a result of the windfall SACU revenue and higher domestic collections, partly due to the introduction of VAT in April 2012. Despite this positive development, it will be difficult for the government to repay all remaining arrears unless domestic borrowing can be increased. Additional expenditure pressures are also rising, particularly on security spending. As a result, the budget surplus of 1 percent of GDP targeted for this fiscal year is unlikely to be met without additional expenditure cuts.
The IMF said the 2013/14 budget would need to aim for a balanced budget, given the lack of financing. The limited scope for additional revenue measures will limit the expenditure envelope to about E11billion, implying additional cuts in non-priority spending.
SACU reported that the annual inflation rate rose to 9.1 percent in October 2012, from 8.7 percent in the previous month. The annual inflation rate for October 2012 was higher than the 6.5 percent recorded during the same period in the previous year.
On average, prices increased by 1 percent between September and October 2012.
The main components with the highest annual rates were health (14.8 percent) food & non - alcoholic beverages (14 percent), and furnishing & household equipment (7 percent), while the lowest annual rates were observed for communications (-0.1percent).
The NIR level for October 2012 was E6.4billion compared to E 4.8billion in September 2012, and sufficient to support the Rand parity.
Interest rate policy remained accommodative for growth with the discount rate recorded at 5 percent, and the prime rate at 8.5 percent.