Mbabane: The Ministry of Finance has already submitted an official request for budget support to the International Monetary Fund (IMF) for an E3.1 billion loan to cushion the budget and help balance payment needs created by the Covid-19 pandemic, and expects a response before the end of this week.
Ministry of Finance Communications Officer, Setsabile Dlamini, mentioned that the request is motivated by the MoF and is supported by the Planning and Budgeting Committee (PBC). It was presented to the IMF Board last week. The IMF gives out the loans to countries affected by the pandemic under the Rapid Financing Instrument (RFI) purchase window.
In excess, the country needs over E3 billion to assist in balancing payment needs created by the pandemic. The Minister of Finance Neal Rijkenberg last week presented a report on the country’s application amounting to E1.6 billion (US$107 million under the IMF’s RFI. He said the World Bank and the African Development Bank have also been engaged to solicit additional budget support to ensure that the Medium Term Fiscal Framework (MTFF) does not have any financing gap. The requested funds amounted to E1.5 billion (US$100 million) totaling to over E3.1 billion (US$207 million). Rijkenberg said the scourge of the COVID-19 pandemic has severely affected Eswatini’s economy, exacerbating pre-existing economic challenges and hindering government’s efforts to preserve fiscal sustainability and support recovery from previous shocks, adding that the measures adopted to contain the pandemic and declining export demand, have led to a significant contraction in economic activity.
As of today Eswatini stands at 2, 775 Covid-19 confirmed cases, 1, 214 recoveries and 43 deaths.
The minister mentioned that being in close proximity to the Republic of South Africa, the most impacted in the region, has exacerbated risks of infection.
As of today South Africa stands at 511, 485 Covid-19 confirmed cases, 347, 227 recoveries and 8, 366, while the current county’s population is 59, 373, 395 of Monday, August 3, 2020, based on Worldmeter elaboration of the latest United Nations data.
Speaking at a press conference in Cabinet last week the Minister of Finance said the technical recession has severely affected domestic revenue, which is expected to fall short of the budget target by 2.6 per cent of GDP. Moreover, to mitigate the impact of the pandemic, the government has put in place a response package at the cost of about 1.5 per cent of GDP, said the minister.
He pointed out the package included additional health spending, ramped up food assistance programmes, increased social protection transfers and improved access to water and sanitation facilities for the vulnerable.
He said to accommodate this additional expenditure, additional resources have had to be mobilized, which would have worsened government’s fiscal position, which had already been in a precarious state prior to the emergence of the scourge. He added that due to the limited space therefore, a non-expansionary supplementary budget for Financial Year 2020/21 has been presented to Parliament to accommodate the additional pandemic-related spending within the existing overall budget ceiling by curtailing spending authorization for capital outlays, selected operating expenses, including transfers to public entities, and limiting hiring plans.
“Despite this prudent approach, given the reduction in GDP, the fiscal deficit was projected to widen to about 8.5 per cent of GDP, compared to 4.7 per cent targeted in the 2020 budget and gross financing needs projected to approach 25.8 per cent of GDP,” said the minister.
Rijkenberg mentioned that government also had plans to mobilize additional revenues through broadening tax base, increasing the upper ceiling of personal tax while giving relief to the lower end, follow the Republic of South Africa if they increase VAT, enhance tax administration, while delaying plans that would reduce corporate income tax collected.
He stated that government was also stepping up efforts to strengthen governance and intensify the fight against corruption, adding that to ensure transparency and accountability on the use of COVID-related resources, government has also put in place measures and conditions for budget tracking, reporting and publishing of all COVID-related procurement and spending.