Economic crisis threatens Swazi unit’s rand parity

May 17 2011 - By Mantoe Phakathi, Business Report

Swaziland’s economic crisis is threatening the parity of the kingdom’s lilangeni currency with the rand.

Central Bank of Swaziland governor Martin Dlamini observed in a statement yesterday that the persistent drop in the country’s reserves threatened the level of confidence of markets in the country’s ability to meet its external obligations.

“Gross official reserves were enough to cover 2.5 months of imports of goods and services compared with 2.9 months covered in January 2011, which is far below the internationally recommended level of three months,” Dlamini said.

He attributed the decline in foreign reserves mainly to the government’s payment of external debts and the appreciation of the rand-lilangeni exchange rate.

And this is not scoring any points for a country that hopes to secure a R1.2 billion loan from the African Development Bank and World Bank.

The crisis has also contributed to a drop in car finance, while there has been an 18.7 percent increase in housing loans.

“Year-on-year credit extended for the purchase of motor vehicles, however, recorded a contraction of 2.8 percent, with other personal loans reflecting a decline of 17.7 percent,” Dlamini said.

The governor noted that the implementation of the government’s fiscal adjustment roadmap (FAR) was exerting pressure on the economy in the short term, although in the long run it would yield benefits.

FAR is the government’s plan to cut costs as a condition set by the International Monetary Fund (IMF) for a letter of comfort issued last month.

Swaziland needs to reduce its public sector wage bill by R240 million this year and the government hopes to cut politicians’ salaries by 10 percent.

“The letter of comfort confirms the imminent inception of an IMF staff-monitored programme that the IMF approved on April 4,” Prime Minister Sibusiso Dlamini said.

But the government failed to secure a 4.5 percent wage cut for public servants, with trade unions arguing that the political system led to the crisis.

“We can only consider pay cuts in a multiparty system,” said National Public Service and Allied Workers Union general secretary Vincent Dlamini.

Senators are also refusing to have their salaries cut, arguing that the government cannot decide on their wages because they are a personal right.

The IMF is in the country for an assessment and since the mission came two weeks ago, no statement has been made on their consultations. The mission leaves Swaziland tomorrow.