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African Development Bank

Kingdom of Swaziland
Country strategy paper 2005-2009

African Development Bank

January 2005

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Executive Summary

  1. Introduction

    The Country Strategy Paper (CSP) for Swaziland covers the period 2005-2009. The proposed strategy, which is based on the Government’s development agenda, has been prepared using the participatory approach that involves all stakeholders, in line with the decision by the Boards of Directors and Management of the Bank Group. The Bank is in the process of moving to a results-based management framework, and although the preparation of this CSP predates the adoption of this framework, every attempt has been made to link goals with strategic objectives and expected outcomes and results to be achieved during the CSP period, such as improved management of public resources, enhancing food security, strengthened health care delivery systems, including slowing down the spread if HIV/AIDS, and achieving universal access to education (see Annex III for details).

  2. Recent Economic Developments

    Swaziland is currently facing a serious socio-economic situation characterised by a sluggish economic performance, high levels of poverty and inequality, high HIV/AIDS infection rate, growing unemployment, and challenges in the area of governance. In 2003 real GDP increased by 2.9 per cent, which was marginally higher than the 2.7 per cent recorded in 2002. The poor economic performance partly reflects low agricultural productivity, a slowdown in manufacturing output and declining FDI inflows. Domestic savings and investment rates are relatively low, and respectively averaged 21.6 and 19.5 per cent of GDP between 2000 and 2003. Also, about a third of the labour force is unemployed. The state of public finances is a major challenge to the authorities. The overall budget deficit increased from 4.8 per cent of GDP in 2002/2003 to 5.8 per cent in 2003/2004. Civil service wages and salaries are by far the largest component of total expenditure, accounting above 50 per cent of recurrent expenditure. Inflation has steadily declined from an average of 11.2 per cent in 2002 to 7.4 per cent in 2003, and a further decline to 4.8 per cent in the first quarter of 2004. The external current account position remains weak and for the third consecutive year, the country recorded an overall balance of payments deficit in 2003, and is not expected to have improved in 2004. Swaziland has a sustainable public debt level, estimated at 31.3 per cent of GDP in 2003 and a debt service below 3 per cent of GDP.

  3. Potential for Growth

    The potential for economic growth and poverty reduction is Swaziland is promising. The country has substantial natural resources and fertile land, which offer a great potential for agriculture led development, which is key to future economic growth and poverty reduction in the country. Swaziland has a well-diversified agro-based manufacturing industry, with sugar and wood pulp as the main foreign exchange earners. In recent years, textiles production has picked up, especially with the participation of the country in AGOA. However, to attain its potential for attaining high and sustainable growth and poverty reduction, Swaziland needs to tackle a number of challenges, which include lack of employment opportunities; the vulnerability of the economy to external shocks, and variable climatic conditions; combating the HIV/AIDS pandemic; and, enhancing good governance.

  4. The Development Agenda of the Government

    To address the challenges confronting the country, the authorities have prepared the National Development Strategy (NDS, 1997-2022), whose vision is to move Swaziland to the top 10 per cent of the medium human development group of countries founded on sustainable economic development, social justice and political stability. To operationalise the implementation of the NDS, the Government formulated the Poverty Reduction Strategy and Action Plan (PRSAP), whose overall objective is to reduce the incidence of poverty in Swaziland from its current level of 66 per cent to 30 per cent by 2015, in line with the MDG and eliminate it by 2022. The main pillars of the strategy include rapid acceleration of economic growth based on broad participation; empowering the poor to generate their own income; and, an equitable distribution of the benefits of growth through public spending. The PRSAP also contains concrete projects and programmes, which are designed to generate income and create employment, combat the HIV/AIDS pandemic and minimise vulnerability, and enhance agricultural production and food security.

  5. The Bank Group assistance Strategy

    The Bank Group’s assistance strategy for Swaziland for the period 2005-2009 aims at supporting the pro-poor economic and social development of the country by providing assistance to the government, and the private sector to successfully address the broad range of development challenges facing the country. The proposed strategy is selective, and focuses on two mutually re-enforcing strategic priorities that seek to address Swaziland’s principal development challenges, namely, Promoting Sustainable pro-poor private sector-led economic growth; and Investing in People and Improving Welfare. The strategy links the country’s development goals to specific objectives and expected outcomes and identifies quantitative targets to be attained during the CSP period.

  6. The Bank Group Work Programme

    The 2005-2009 Bank Group assistance programme in Swaziland will combine lending and non-lending activities. Non-lending activities will focus on economic and sector work, where three studies will be undertaken, namely, a Country Governance Profile, and Labour Market Study, and a Review of Social Sector Expenditures. The lending programme will, in the short- to medium-term (2005-2007) concentrate on the social sector, while the challenges in agriculture and rural development, and physical infrastructure will continue to be addressed through the on-going projects that the Bank is currently implementing. Thus, two operations in the social sector are likely to materialise: a Health II Project and an Education II Project. The country’s sustainable lending limits range from UA 17 million to UA 36 million per year, reflecting the small size of the country.

  7. Areas Requiring Dialogue

    To ensure a successful implementation of the Bank strategy for Swaziland, it is important for the Bank to maintain its open dialogue with the government and other stakeholders on a number of key issues. These include macroeconomic policy reform and implementation, the need for good governance, creating a conducive environment for private sector development, improving portfolio performance, and building a sound pipeline of projects.

  8. Conclusion and Recommendation

    1. Over the current CSP period, Swaziland will face major challenges in reducing poverty and inequality, in combating the spread of HIV/AIDS, ensuring food security and reducing unemployment. Thus, during the period 2005-2009, the proposed Bank strategy seeks to assist Swaziland to attain higher and sustainable pro-poor economic growth anchored on private sector development and to address the challenges posed by the communicable and non-communicable diseases, especially HIV/AIDS. Over the medium-term (2005-07) assistance will therefore, focus on the social sector and economic and sector work. Beyond this period, new projects could be processed in the agriculture and infrastructure sectors, following a mid-term review of the strategy in 2007.

    2. In view of the foregoing, the Board is invited to consider and adopt the Country Strategy Paper for the Kingdom of Swaziland for the 2005-2009 period.

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