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Standard Bank

Swaziland’s 2006 budget

Africa market briefing

Jan Duvenage

Standard Bank Group Economics

27 February 2006

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The Minister of Finance Majozi Sithole presented the budget to parliament on 17 February.

The economy is expected to have grown at 2% in 2005 and is expected to grow by 1.7% in 2006, according to IMF projections. The currency, which is pegged to the rand, remained strong in 2005. The central bank’s discount rate was 7% and the prime rate 10.5% at end 2005, which is on a par with South Africa. Inflation averaged 4.8% in 2005. Net foreign assets were equivalent to just 1.9 months of imports, which is below the accepted minimum of three months. Total stock of public debt was relatively low at 22.9% of GDP at end-September 2005. These indicators paint a mixed, but generally positive, picture.

Yet, the country is confronting a number of serious problems, not least the political unrest and dissatisfaction with Africa’s last remaining absolute monarchy. Political parties are banned. A spate of petrol bombings since last year has resulted in several arrests. Poverty levels (almost 70% of the population lives below the poverty line) and unemployment rates (a third of the labour force) are unacceptably high. Swaziland recently overtook Botswana as the country with the highest HIV/Aids infection rate. About 80 000 children have been orphaned by the Aids pandemic and some households are headed by children. Droughts, food shortages and harvest failures aggravate the dire situation.

The main themes of the budget were poverty alleviation, HIV/Aids, employment creation, food security, macroeconomic management, economic growth and revenue diversification.

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