i. Swaziland has been experiencing a long-term decline in economic growth, rising
poverty and a widespread HIV/AIDS epidemic, all in part related to past policy choices. While
part of this performance was due to exogenous shocks, policy choices—especially in the areas
of macro-fiscal policy, social expenditure policy, and public expenditure management and
controls––played a large part in the resulting economic and social outcomes. The theme that
permeates much of the analysis is the wide and often worsening gap between the otherwise
sound policy objectives on the one hand and the actual use of policy instruments and economic
and social outcomes, on the other.
ii. The gaps between national goals and national outcomes are especially wide in the areas
of fiscal policy, social expenditure policy, and public expenditure management (PEM) and
controls. First, contrary to fiscal prudence, fiscal, especially expenditure policy, has been a
source of rising deficits and debt, and the overall macroeconomic instability; a significant part
of public expenditures seem to benefit, directly and indirectly, the oversized and, in some key
areas, inefficient civil service. Second, instead of serving the poor first, social expenditures
appear to have been geared more towards the wealthier segments of the population. And third,
weak PEM/controls and spending pressures from the line ministries contributed to the poor
performance of the expenditure policy and the overall fiscal crisis. These three policy areas are
closely interlinked. Strengthening fiscal policy, as a key instrument of achieving
macroeconomic stability, needs to be accompanied on an adequate and fiscally prudent level
and with a productive composition of public expenditures that limits waste and reflects
declared social objectives. To achieve those ends, social expenditures must clearly be geared
towards the poor. To be effective, both must be supported by substantial improvements in
public expenditure management and controls mechanisms that are critical in implementing the
voted budgets. The report argues that strengthening policy implementation in all three areas
will be key to reversing the current fiscal crisis, achieving better social outcomes, and
strengthening PEM/controls mechanisms for more effective poverty reduction.
iii. After a brief growth retrospective, Chapter 1 focuses on fiscal policy––especially
public expenditure policy––governance and corruption, and public enterprise related factors
behind the fiscal crisis. Regarding fiscal policy, a key conclusion is that the oversized and
increasing wage bill has been among the root causes of the loss of expenditure discipline. This
problem is of both short-term (fiscal discipline) and longer term, structural nature (the
excessive size of the civil service), so it must be dealt with on both fronts. The control of other
current expenditures was also lacking. Moreover, the composition of public expenditures is
inefficient, geared much more towards the military and security spending and general public
administration than towards health and education spending. As a result, both voted and
executed public expenditures contain considerable waste that could be cut, improving
expenditure efficiency and leaving more resources for poverty reduction and service delivery
to the neediest, not just the civil service. For example, there is an urgent need to rationalize the
large government expenditures for the maintenance and use of the vehicle stock and official
foreign travel, creating fiscal space for productive expenditures. Official foreign travel alone,
for example, accounted for E 115 million in 2004/05, more than the entire budget on primary
education. To address these and related issues, the chapter outlines a possible expenditure
reduction strategy aimed at restoring fiscal stability as a basis for stronger growth and more
rapid poverty reduction in the future. The authorities’ 2006/07 draft Budget currently under
discussion provides a first step – and a potentially good basis – towards restoring fiscal
stability in Swaziland. The challenge is to resist special interests, pass a sound budget into law,
and then implement it fully, in line with declared priorities of the government.