IMF calls for improvement in governance

Improvements in governance, particularly the rule of law, should be addressed if Swaziland hoped to emerge from "serious" economic difficulties, a recent International Monetary Fund (IMF) report has said. At the conclusion of a mission to the landlocked country in October, the IMF noted that "an unresolved crisis in the judicial system, uncertainties over the new constitution and concerns about governance" had fuelled social tensions and weakened donor sentiment. The Fund highlighted a significant widening in the central government's fiscal deficit, which, it argued, was threatening broader macroeconomic stability. "The mission is greatly concerned by the expansion in the fiscal deficit in 2003/04. While the February 2003 budget envisaged a reduction in the deficit to 4.5 percent of the GDP in 2003/04, the mission estimates that on current policies the deficit would increase to over 6.5 percent of GDP, largely reflecting lapses in expenditure control," the report noted. Greater fiscal discipline would also prepare the budget for the pressures associated with HIV/AIDS, the Fund said. Although there were signs of growth in 2002, mainly due to a boom in the construction and manufacturing sectors, 2003 had so far proved less productive. One of the key concerns raised in the report was the high level of unemployment, despite Swaziland's participation in the US Africa Growth and Opportunity Act (AGOA). Although AGOA had contributed to the emergence of an export-oriented clothing industry, which had created 20,000 new jobs, limited investment in other labour-intensive industries had kept overall unemployment high. The IMF team called for further public enterprise restructuring and accelerated privatisation, and noted the submission of government's privatisation policy to parliament earlier this year. Compounding an already precarious situation, ongoing food shortages were of serious concern. An estimated 150,000 people are expected to be in need of food aid by the end of the year. The Fund considered land reform as central to addressing food shortages in the country and recommended the swift enactment of the Land Policy Act, which would provide greater security of land tenure by instituting long-term leases for agricultural land. "In addition, allowing the use of landholdings as collateral would contribute to investment and productivity gains, enhance farmers' access to commercial credit, and help alleviate poverty," the IMF said.