Country Report Swaziland January 2008

Economic policy: IMF mission stresses the revenue challenge

The IMF conducted its 2007 Article IV consultation discussions with Swaziland in November. According to the statement issued by the IMF, Swaziland's economic growth has been slower than that in most of Sub-Saharan Africa in recent years. The IMF expects real GDP growth in 2007 to slow to 2.3%, from 2.8% in 2006, owing mainly to drought and forest fires. Inflation is expected to average about 8% in 2007. Although strong inflows of revenue from the Southern African Customs Union (SACU) have enabled the Central Bank of Swaziland to rebuild international reserves, SACU transfers are expected to decline after 2010, as SACU imports, particularly for South Africa, are expected to decline and the implementation of the new revenue-sharing formula works its way through. SACU transfers represent the main source of government revenue, and the IMF recommended that fiscal policies take account of the expected decline, with measures being taken to strengthen revenue admin-istration and broaden the tax base. These recommendations merely repeat those of previous Article IV reports. The mission recommended that costs of doing business should be reduced, infrastructure (transport, energy and tele-communications) improved and land productivity increased, partly through land-reform measures. However, land reform has been difficult to implement in the past, and a new strategy needs to be produced for Swaziland. Land reform will require considerable political will, as will the control of government expenditure necessary for a more disciplined macroeconomic performance.

© 2008 The Economist lntelligence Unit Ltd. All rights reserved
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