Assessing Swaziland’s Fiscal Sustainability and Policy Options

Abstract

In 2011, Swaziland's fiscal policy was extensively scrutinized following its worst fiscal crisis in decades. The impacts of fiscal adjustment on Swaziland's growth, inflation, and sectoral allocations of resources were some of the issues analyzed. The fall in the Southern African Customs Union revenue receipts to levels below the trend line, for two consecutive years, and the fiscal challenges that followed were the main motivation behind this interest. This paper attempts to establish whether fiscal sustainability was threatened, and if so what were the policy options? Based on the results from econometric estimations, using a sample for the 1986 to 2012 period, I show that the country's fiscal sustainability was not threatened. However, calculations of the tax gap and the primary gap covering the period 2000 to 2016 reveal that fiscal sustainability was threatened. Subject to the major drivers of government expenditure and revenue handles, it is concluded that, in the short run, the two needed to be realigned while also allocating more resources to support growth.

Assessing fiscal sustainability in Swaziland

“…The findings of the study are in line with those of Mufusire (2015), who also argued that the restoration of Swaziland's fiscal policy to a sustainable path broadly requires adjustment of fiscal variables (mainly government expenditure) in the short term while structural reforms can be done in the medium term.…”