By Phiwa Sikhondze
The International Monetary Fund (IMF) has warned the Kingdom of Eswatini to brace for fiscal challenges as revenues from the Southern African Customs Union (SACU) normalize and called on the government to exercise expenditure restraint.
In a report following the completion of its 2024 Article IV consultation with Eswatini, the IMF noted that SACU receipts, which had contributed to a strengthened fiscal position in recent years, are expected to fall, potentially widening the fiscal deficit.
Eswatini has benefited from record-high SACU receipts in the past two fiscal years, totaling E11 billion in 2023/24 and an unprecedented E13.06 billion for the 2024/25 fiscal year. This significant windfall has bolstered the country’s budgetary position, contributing to a marked reduction in the fiscal deficit.
However, the Minister of Finance, Neal Rijkenberg, has cautioned that SACU revenues are expected to decline moving forward and warned about the potential fiscal impact this would have, stressing the importance of the SACU Revenue Stabilization Fund in safeguarding Eswatini’s fiscal stability.
To mitigate the impact of fluctuating SACU revenues, the government has been actively injecting money into the Fund. This proactive measure aims to protect the economy and ensure the continuity of public services and development projects. The minister expressed confidence in the fund’s ability to strengthen the country’s financial resilience and support sustained economic growth.
Eswatini’s fiscal position has improved significantly, with the overall fiscal deficit narrowing to 1.5% of GDP in the fiscal year 2023/24, down from 6.2% in the previous year.
This was primarily driven by high SACU receipts, which accounted for a substantial portion of the country’s revenue, and by government measures aimed at controlling expenditure.
Public debt currently stands below 40% of GDP, a threshold the IMF considers moderate, but financing challenges and persistent public arrears continue to weigh heavily on fiscal sustainability. The IMF called for urgent measures to clear public sector arrears, which continue to undermine the financial sector and create significant fiscal risks.
Moreover, the IMF noted that while the current account surplus was recorded at 2.2% of GDP in 2023, international reserves remain under pressure, covering only 2.2 months of imports, below the adequacy benchmarks.
The IMF recommended better management of SACU revenues and encouraged Eswatini to pursue other financing options, including from international financial institutions (IFIs), to support critical reforms and public investment projects.
The IMF also highlighted the need for comprehensive reforms in public financial management to address weaknesses, including liquidity and debt management. These reforms, the report suggested, would help the country better prepare for external risks and ensure fiscal discipline over the medium term.