MBABANE, 20 March 2007 (IRIN) - An International Monetary Fund (IMF) report sees no relief for Swaziland's economic decline without major changes in spending priorities and privatisation. An unending cycle of droughts and high HIV/AIDS prevalence has slowed the mountain kingdom's economic performance, leaving it with few resources to tackle these problems.

The double-digit growth rate of the 1980s and '90s has dropped to about two percent per annum since 2000, the IMF said in its report released this week. Two-thirds of the country's roughly 1 million people live on US$2 or less a day, and the prevalence rate of HIV/AIDS has reached 34.2 percent among those aged 15 to 49.

"Over that same period, rising government expenditures, especially on the wage bill, undermined fiscal sustainability and reduced foreign reserves to critically low levels. Poverty has escalated in the face of high and rising unemployment, food shortages, and the world's highest HIV prevalence rate," the IMF team reported.

The Central Bank of Swaziland commented in its most recent report on the state of the nation's economy "that government's wage bill is the prime factor behind the growth in recurrent expenditure, accounting for 58 percent of total government expenditure".

Suggesting an urgent downsizing of government operations and change in land-use policy, the IMF called on the private sector to lead an economic revival. Eighty percent of Swazis are peasant farmers who reside on communal Swazi Nation Land under palace-appointed chiefs, and cannot secure bank loans to purchase irrigation equipment because they do not hold title deeds to the land. Agricultural experts say this has hindered agricultural production and compromises food security.

A Central Bank source told IRIN, "We have advocated civil service reform for years as key to trimming the government budget, and releasing funds for poverty alleviation and humanitarian needs."

However, downsizing the public workforce and employees of government-owned corporations, such as Swaziland's broadcasting services, telephone and postal services, and water and electricity utilities, would be unpopular and politically risky.

"While the authorities' intention to address these issues is encouraging, decisive action and implementation are now urgently needed," said the fund. If Swaziland demonstrated forward movement toward economic reform, support from the international community would follow.

"Reforms are urgently needed to enhance labour and land productivity, and improve the business climate," the IMF said. "This will involve sustained efforts to improve skills training, strengthen governance and promote land reform, while the privatisation of utility companies should lower costs of key services."

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