STATEMENT BY THE RT HON PRIME MINISTER

DR B.SIBUSISO DLAMINI

DURING THE MEETING WITH THE INTERNATIONAL MONETARY FUND

AT THE CABINET OFFICES

THURSDAY 1 OCTOBER 2015

Honourable Ministers

Mr Jiro Honda and the International Monetary Fund Team

Senior Government officials

Representatives of the Media

Ladies and Gentlemen

It is my honour, on behalf of His Majesty's Government, to welcome the team from the International Monetary Fund (IMF) to my offices today.

Government has enjoyed an excellent relationship with the IMF over the years through the medium of the annual Article IV Mission that provides advice primarily on the economic and fiscal position in the Kingdom.

The IMF has a truly global reach and while the advice given to governments around the world is not always what they want to hear, the intention of the IMF is, without exception, to be of assistance and their recommendations rarely, if ever, prove to be incorrect or inappropriate. Tough love in the fiscal sense is frequently the most effective route, and it must be said that the IMF bring a vast amount of experience to their assignments.

This year's visit by the IMF, while advisory rather than instructive, is communicating to us essentially what we already know, but has brought greater clarity and precision to the fiscal projections, especially regarding that huge determinant of future flows of revenue to Government - the payment received from the Southern African Customs Union (SACU) under the prevailing revenue-sharing agreement.

That source of revenue is, from Swaziland's perspective, unpredictable in terms of precise figures and non-controllable since it is heavily dependent on economic growth rates in countries linked economically to our own. As we had expected, the level of SACU payments will fall to a significant extent over the next two or three years, and this fall has been clearly confirmed and amplified by the IMF during this Mission.

As Government has stated publicly on many occasions, the solution is to reduce dependence on SACU revenue by boosting domestic-source revenue through faster economic growth and improved collection of revenue, principally taxes. And, by taxes, I mean taxation properly assessable and payable under the prevailing legislation. That is the task of the Swaziland Revenue Authority (SRA) and, as the SRA concentrate on conveying and sustaining ethos of efficiency and politeness, it must not be impeded in the process of assessing and collecting what taxation is due under the law of the land.

At the same time, in order to avoid fiscal shock as the level of SACU revenue declines, Government will build with some urgency on the improved financial management, implemented through the Fiscal Adjustment Roadmap over the past few years. All areas of Government spending, including the control mechanisms, will come under close scrutiny in the coming weeks, accompanied by a re-prioritisation exercise, undertaken both in recurrent and capital expenditure, while protecting critical areas of social and development needs. Since a large proportion of recurrent expenditure is made up by public sector salaries this item will inevitably have to come under rigorous review.

Government will also continue the intensification of efforts to increase the attractiveness of our business environment, not only to foreign direct investment but also to existing and potential domestic investors, across the spectrum from large down to micro-scale enterprises.

In the medium to long term it will be faster economic growth that will provide the increase in Government revenue to the level needed to meet service delivery targets. After the recent fiscal challenges we achieved improved rates of economic growth, while keeping the rate of inflation at a low level. At the present time, however, the rates of actual and projected economic growth remain relatively low, confirmed by the weaker regional economic outlook. Going forward, that is one of the challenges on which we will focus our attention. We believe that the recently established Investor Roadmap Unit will identify and secure the necessary improvements that will make Swaziland the investment location of choice.

It remains for me, on behalf of His Majesty's Government, to thank Mr Honda and his IMF team for the valuable work done and informative presentations made during this Mission and we look forward to working with them to minimise the impact of the challenges that we face in the coming few years.

Thank you.