SWAZILAND: Declining customs union revenues threaten AIDS response

Photo: Taurai Maduna/IRIN
King Mswati III's government is facing a financial crisis
Mbabane, 16 November 2010 (PlusNews) - An economic meltdown in Swaziland, exacerbated by a major decline in revenue from the Southern African Customs Union (SACU), is unlikely to leave the national AIDS response unscathed, say local health officials.

“There will be an impact on the health sector, but to what extent we cannot say,” said government economist Deepak Sardiwal of the Ministry of Economic Planning and Development.

Revenue from SACU - the world's oldest customs union, comprising Botswana, Lesotho, Namibia, Swaziland and South Africa - contributed 76 percent of the Swazi government’s income in 2009 but dropped in 2010 and is expected to continue declining over the next decade.

The global recession has been blamed, but according to Khaled Ahmed of the Health Economics and HIV/AIDS Research Division at the University of KwaZulu-Natal in South Africa, the decline in SACU tariffs and revenue collection is part of a policy shift towards freer trade within the region that is likely to continue.

Rather than put aside some of the additional revenue generated by SACU while it was plentiful, the Swazi government went on a spending spree and ignored warnings from the International Monetary Fund (IMF) that its public sector bureaucracy was bloated far beyond the needs of a small country of one million people.

“Today we sit with no savings or new receipts. We’ve dug ourselves into a pretty deep hole, according to the IMF. It’s serious, very serious,” Derek von Wissell, director of the National Emergency Response Council on HIV/AIDS (NERCHA), told IRIN/PlusNews.

“Hard decisions”

Ahmed, who has written an issue brief on the health expenditure implications of a decline in SACU revenue, predicted that in future Swaziland, which has the world’s highest HIV prevalence rate, will face “a chronic shortage of funding for HIV/AIDS programmes”.

“When you have a high percentage of government revenue coming from a source that will decline over the next few years, it’s only natural that programmes will have to be cut,” he told IRIN/PlusNews. “They’ll need to make hard decisions about whether, for example, they should expand prevention or treatment.”

''Today we sit with no savings or new receipts. We've dug ourselves into a pretty deep hole...It's serious, very serious''
For years, the Swazi government paid its large public sector wage bill with SACU receipts despite warnings from the IMF and from a recently renegotiated treaty among SACU member states that this income would fall from 17.6 percent of Swaziland’s GDP in 2005 to 9.4 percent in 2020.

In the absence of a strong private sector economy and a paucity of international direct investment in the country, the government is unable to replace mismanaged and now dwindling SACU receipts with revenue from other sources, and has turned to borrowing from the Central Bank of Swaziland to meet its wage bill.

After going over government books, an IMF team has called for 10,000 of the country’s 36,000 bureaucrats to be laid off.

Finance Minister Majozi Sithole has given a qualified assurance that health-related programmes will be spared the axe. “Regardless of the crisis we are in, the health as well as the education sectors will not be affected by most of the changes that will follow,” he told a recent meeting of local bankers.

But the economic crisis comes at a time when the AIDS situation in Swaziland requires a larger than ever amount of resources. According to Ahmed and his co-authors, Harold Ngwalala, and Alan Whiteside, also of the University of KwaZulu-Natal, “the cost of care and treatment for people living with HIV and AIDS as well as support for those affected, applies pressure to already tight budgets.”

Donors to the rescue?

Swaziland is heavily dependent on foreign donors to finance its AIDS programmes. Asked whether donors might fill the gap left by an increasingly insolvent government, Whiteside expressed doubt. “[Swaziland] has received money from the Global Fund [to Fight AIDS, Tuberculosis and Malaria] and it has support from PEPFAR [the US President's Emergency Plan for AIDS Relief] and the European Union. Many of the other bilateral donors need to hang their heads in shame at the fact that they are overlooking the BLNS [Botswana, Lesotho, Namibia and Swaziland] countries, especially in the light of this catastrophic fall [in SACU revenues],” he said.

He added: “It may be that HIV is less affected because it is ring-fenced funding. But can you tell me which of the donors has said `we’ll provide you support for the next 10 years or even the next five years?’ All donor funding fluctuates and is unreliable and while HIV may be slightly protected in the short term, the health of the nation isn’t protected at all, and in the long term it’s catastrophic.”

Ahmed agreed that the assumption that donors will step in to limit a humanitarian catastrophe might be wishful thinking. “Lobbying for increasing aid is probably a short-term solution because agencies like PEPFAR are flat-lining funding. In the medium to long term we’d always advise that there has to be a restructuring of the fiscal framework and to look for other sources of domestic revenue,” he said.

Threat to health, education services

Von Wissell expressed concern that the crisis also poses a threat to Swaziland's human resources capacity which has already been eroded by the AIDS epidemic. He worried that the government may ignore the advice of the IMF not to cut back on social spending.

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“It is extremely short-term thinking to prejudice your human capital with less education, less health, so you will be less well off once the economic crisis ends. We are urging government not to compromise service delivery and future human capital. One year without school affects a whole generation,” he said.

Whiteside was gloomy about the future of Swaziland's AIDS response "now that the money's running dry".

“I think it means that we’ll start rationing - it’ll be a subtle form of rationing where we’ll say we’ll provide treatment in [the eastern provincial capital] Siteki and if you live 30km away you won’t get treatment because you won’t be able to get there; or, you used to have to wait four hours to see a doctor, now you have to wait 12 and some of you die in the queue," he said.

"We don’t have the courage to ration in an explicit manner, so we will do it in an implicit manner.”


Theme (s): Economy, HIV/AIDS (PlusNews),

[This report does not necessarily reflect the views of the United Nations]

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