This paper examines the stance of fiscal policy in Swaziland since the 1980s, and the attempts that have been made to restrain the excessive deficits that have built up over the past 15 years. Swaziland’s fiscal difficulties have arisen in part from two decades of slow growth and falling revenue from SACU’s revenue sharing pool, aggravated by the collapse of fiscal discipline.

Necessary conditions for adjustment:

It would be easier to reduce the fiscal deficit and stabilise debt burdens if growth were to pick up and the tax system were restructured. But growth alone, or expanding revenue sources per se, will not resolve the problems. Bold actions to rationalise government expenditures and strengthen mechanisms for public debt management are essential for the needed adjustment.

Fiscal adjustment roadmap:

The fiscal adjustment roadmap, if firmly implemented, could bring the deficit down to a sustainable level and reduce dependence on SACU transfers, and government debt would remain sustainable over the medium term.

Consequences of inaction:

However, policy inaction would be a sure recipe for deeper crisis, as the overall fiscal balance would remain above 14.5% over the medium term and the debt-to-GDP ratio would rise to unsustainable levels.