Eswatini Public Finance Review

Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - Eswatini's economic growth has been modest since the late 1990s, averaging 2.8 percent from 1996 to 2020, with a strong rebound averaging 5.3 percent from 2021 to 2023 [28][31] - The public debt stock was 40.4 percent of GDP in 2023, down from a peak of about 45 percent in 2022, while public expenditure arrears were estimated at 4.9 percent of GDP in 2023 [31][35] - The Fiscal Adjustment Plan (FAP) aims to reduce the fiscal deficit and reinforce debt sustainability by broadening the revenue base and reducing the public wage bill [32][34] Macro-Fiscal Context - Expansionary fiscal policy since the late 1990s has limited the government's ability to respond to external shocks, with the fiscal deficit falling to 2.1 percent in 2023 from about 7 percent in 2018 [36][37] - The volatility of Southern African Customs Union (SACU) revenues has contributed to public debt accumulation and expenditure arrears [36][37] Revenue Mobilization - Domestic revenue mobilization can be optimized by reviewing and rationalizing tax holidays and expenditures, with tax expenditures amounting to nearly 13 percent of GDP in 2022 [43][44] - The tax gap was estimated at about 5 percent of GDP in the 2022 fiscal year, indicating potential for increased revenue through improved tax administration [46] Public Spending - Public expenditures represent about 30 percent of GDP, with social sector spending absorbing about 9.6 percent of GDP between 2018 and 2022, yet outcome indicators fall short [49][50] - Enhancing public procurement systems and digitalizing the public sector could improve the efficiency and value of public spending [51][53] Public Investment Management - Strengthening public investment management while incorporating climate considerations is crucial for maximizing the impact of public spending [56][58] - The public investment management system faces challenges such as under- and over-budgeting and delays in project implementation [57][58] Health Sector Insights - Addressing structural challenges in the health sector could lead to better health outcomes, with key indicators remaining high despite substantial investments [60][62] - Strengthening primary healthcare services and enhancing resource management are vital for improving service delivery and health outcomes [63][64] Conclusion and Policy Options - The report outlines a roadmap for reforming fiscal policy and enhancing public financial management, focusing on stabilizing revenue streams and improving expenditure efficiency [65]