The objective of the mission was to conduct a review of the country’s IMF Staff-Monitored Programme (SMP) that government signed into in January 2011.

A Staff-Monitored Programme provides a formal framework for dialogue between the IMF staff and the Government on economic and fiscal policies for a period of six months. Under a Staff-Monitored Programme, the Government and IMF agree on policies and targets to be monitored by IMF staff within the six-month period. The main difference between a Staff-Monitored Programme and other IMF programmes is that the IMF does not provide financial support. However, developing the track record with the IMF gives Government greater access to budget support from other donor organizations.

Development partners have so far planned to lend Government US$170 million in budget support to ease the fiscal adjustment necessary following the reduction in SACU receipts by 11% of GDP in 2010/11. The loan disbursements depend partially on Government’s performance under the Staff-Monitored Programme, as well as other, separate conditions agreed with Government.

In their concluding statement the IMF explained that Government met all but one of the structural (policy) benchmarks, as well as two out of six quantitative (fiscal) targets on government finances. Government was able to remain within the ceiling agreed on external and domestic arrears, as Government took steps to clear some of the arrears accumulated in 2010/11. However targets on the deficit, net domestic assets, reserves and social spending were missed. This was because financing from development partners and the domestic financial sector was insufficient to bridge the gap between budgeted spending and revenue collections. The delay on the decision to cut the wage bill by E240 million also contributed in missing some of the targets.

The Government has committed to signing onto a new Staff-Monitored Programme, and is currently discussing the fiscal adjustment strategy with the IMF and other development partners. Poor assumptions on financing and reserves in the last Staff-Monitored Programme have been one of the major factors for not meeting some of the targets and unnecessarily blocked Government’s access to the budget support necessary to ease the fiscal adjustment and stabilize the economy.

The Government has made it clear that the conditions proposed by the recent mission, which included a unilateral salary cut of 10% for all public employees, were not realistic and not comparable to conditions set for other countries of the same economic status as Swaziland. The Government is working to ensure that the next Staff-Monitored Programme is credible and achievable.

While discussions continue, the Government will continue with its plans to reduce the budget deficit, including by implementing policies to reduce the size of the civil service over the medium term in line with the Fiscal Adjustment Roadmap.  The Ministry of Finance will submit a revised budget to Parliament to reflect lower than expected financing for 2011/12.

In parallel, it will continue to take steps to improve the value for money of public expenditure and strengthen the controls of the public finance management system and increase transparency. To this end, the Government expects the new Public Finance Management Bill and amendments to the Audit Act to be submitted to Parliament before the end of October. The Government will also work with development partners to develop a comprehensive public finance management reform strategy designed to yield significant savings in the medium term.

The Government will continue to keep the public informed on the fiscal position and the developments on all IMF engagements.