Mr. Jiro Honda, Manabu Nose, Cesar Sosa Padilla, Mr. Jose L. Torres, Ms. Murna Morgan, Mr. Fernando G Im, and Ms. Natalia A Koliadina
Over the past decade, Lesotho and Swaziland have faced significant volatility in their fiscal revenues, owing to highly unstable Southern African Customs Union (SACU) receipts. Based on model analysis, this paper explores the advantages of implementing fiscal rules to deal with such volatility. It finds that the use of a structural balance target could smooth the growth impact from revenue shocks while helping preserve sufficient international reserves during bad times. From a long-term perspective, it suggests possible welfare gains from introducing fiscal rules. Last, it concludes that, based on experiences in other countries, developing strong institutions and improving public financial management are necessary steps to ease the transitions to a rules-based fiscal policy framework.
On behalf of my authorities, I thank staff for the candid deliberations during the 2011 Article IV Consultations in Mbabane. My authorities welcome the frank assessment of the current and medium term policy challenges facing Swaziland and broadly agree with the thrust of the staff appraisal.
The second round effects of the global economic crisis negatively impacted SACUreceipts that depend largely on trade, and accounting for more than 40 percent of total government revenues. The reduction in SACUreceipts by more than 50 percent coupled
I. E conomic and F inancial B ackdrop
1. Namibia is benefiting from a favorable external environment :
The terms of trade strengthened by an estimated one-third between 2005 and 2007 on high mineral export prices. Improved diamond extraction rates and rising SACUreceipts driven by South African import growth also contributed to an external current account surplus estimated at 16–18 percent of GDP in 2006 and 2007 ( Figure 1 ).
A fiscal surplus of 3.4 percent of GDP was recorded in 2006/07 1 because of high SACUreceipts and tight spending
Sources: National authorities and IMF staff projections.
1 As of October 2007 except for the current account balance and SACUreceipts which are end 2007 projections.
6. The authorities have implemented some measures since the 2006 Article IV consultation, but made limited progress on civil service reform . Budgetary control has improved, which has yielded some results in controlling the fiscal arrears. Improvement of the public procurement system has also started with assistance from Crown Agents, while the UNDP and the World Bank are assisting in strengthening