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ESWATINI’S DEBT ALARMING - UN

By SIBUSISO DLAMINI | 2022-10-19

The United Nations Development Programme (UNDP) has warned that a serious debt crisis is on the brink of taking hold of the country.

In a new report, UNDP says Eswatini is part of nine ‘threshold’ countries which are ‘just on the brink of being amongst the world’s 54 most vulnerable in urgent need of debt relief’.

The agency’s report titled ‘Avoiding Too Little Too Late’ states that debt troubles had been brewing in many of the affected countries long before the COVID-19 pandemic hit, and takes stock of the unfolding debt crisis across developing low-and middle-income countries. Countries at the most immediate risk are Sri Lanka, Pakistan, Tunisia, Chad and Zambia.

“Without immediate relief, these countries will see rising poverty levels and desperately needed investments in climate adaptation strategic policy engagement team, and mitigation will not happen,” said Lars Jensen, an economist and policy specialist in UNDP’s bureau for policy and programme support.

Eswatini is at the bottom of the borderline list alongside Angola, Cape Verde, Kyrgyzstan, Madagascar, Maldovar, Nicaragua, Niger as well as Saint Vincent and the Grenadines.
According to Ministry of Finance Principal Secretary Sizakele Dlamini’s acknowledgements in the annual public management debt statistical bulletin, total public debt stood at E26.1 billion at the end of March 2021.

“This is equivalent to 40.2 per cent of GDP composed of both domestic and external debt at 24.2 per cent and 15.9 per cent of GDP, respectively,” said the PS while also explaining that the total debt rose in nominal terms over the last financial year due to major capital projects having been funded through both external and domestic financing.

This means the country’s debt to GDP ratio now exceeds the 35 per cent limit of GDP in nominal terms, which is a recommendation of the Bretton Woods institutions such as the International Monetary Fund (IMF) and the World Bank Group.

“The main focus is to invest heavily on capital projects expected to create an enabling environment for the private sector to operate and at the same time improve the welfare of the country’s populace,” elucidated the PS.

Risk
Minister of Finance Neal Rijkenberg referred all queries to the aforementioned bulletin which recognises potential fiscal risks and outlines a proposed strategy of the existing debt portfolio.

“Eswatini is aware of increased accumulation of debt as a result of the desire to fund major infrastructure development projects as a catalyst to foster economic growth,” reads an excerpt from the bulletin.

Meanwhile, total public external debt disbursements for the financial year 2021 amounted to E357.1 million, an improvement from the previous year’s E1.54 billion.

This progress is attributed to drawdowns from loans to fund projects such as the Manzini-Mbadlane Highway project, the Manzini Water Supply and Sanitation project, the Lower Usuthu Smallholder Irrigation project, the FINCLUDE project, the Shiselweni region Energy Reinforcement project as well as the Shiselweni region Water Supply and Sanitation project.

A positive from the bulletin is the significant improvement in arrears after government’s intensified efforts to clear debts accumulated since the fiscal year 2016/17. Stock of government arrears were estimated at E1.5 billion at the end of March 2021, from E5.3 billion in March 2020, and to put an end to this, Cabinet approved an arrears clearance and prevention strategy expected to bring them to manageable levels by monitoring and controllingall commitments with the aim to prioritise critical expenditure.

“These will avoid unnecessary and wasteful expenditure, prioritise payment of arrears and align them to cash available and continue to explore other sources of funding, including domestic sources and cooperating partners,” reads another part of the bulletin.

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