Eswatini

Rapid assessment of the impact of the fiscal crisis in Swaziland

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Assessment
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EXECUTIVE SUMMARY

The fiscal crisis was central to Swaziland’s economic and social developments in 2011. It resulted from the collapse of transfers from the Southern African Customs Union (SACU), the historically high level of expenditures (and wages) and the dried up access of the government to domestic and foreign borrowing. The ensuing liquidity squeeze has hampered growth and employment, with possible adverse effects on progress towards the Millennium Development Goals. Weak governance and especially the lack of sound public financial management (PFM) were the key factors behind these developments. Findings

To find out more about the transmission channels of the crisis, households’ coping mechanisms, and welfare impacts at the household level, the United Nations Swaziland carried out a cross-sectional nationally representative survey of 1334 households in November 2011. Findings from this UN rapid assessment are as follows:

  • Rising food prices and reduced labor income were the main economic shocks that hit households in 2011; each shock was experienced by almost one out of four households;

  • Households adopted various coping strategies, but relied mostly on ‘budget management’, in particular reduced quality (and quantity) of consumed food and changes in transport mode;

  • From the food consumption patterns, signs of households under stress have emerged (e.g. some households were eating less than three (3) meals a day, skipping meals for entire day, etc.).

Moreover, the rapid assessment suggested that aggregate shocks such as the fiscal crisis compounded by rising food prices can severely impact poorer households and vulnerable groups such as households members living with HIV or female-headed households in rural areas. Given the underdeveloped financial markets and formal social assistance schemes in Swaziland, the crisis was transmitted to these groups mainly through reduced incomes (job losses, wage cuts, asset reduction, poorer prospects for employment and own firm creation, and reduced access to credit). In turn, the reduced (real) incomes have constrained opportunities of these households to maintain their members’ food consumption, to benefit from social services and to accumulate human capital.