GOVT CASH FLOW CHALLENGES SLOW ECONOMY

MBABANE – Government’s E3 billion arrears are not only causing businesses to crumble, but also slow down the economy.
The State’s arrears were a result of government’s continuous cash flow challenges.  

The Central Bank of Swaziland (CBS) has projected that economic activity could decelerate to 1.3 per cent in 2018, before picking up to 2.0 and 2.7 per cent in 2019 and 2020, respectively.

“The slowdown in 2018 is mainly linked to the government cash flow challenges that have led to an accumulation of arrears from the previous two years.

This will weigh heavily on the performance of the ‘construction’, ‘financial’ and ‘wholesale and retail’ sub-sectors,” said Sithole, when delivering his 2018 Monetary Policy Statement at Happy Valley yesterday.

An economist, who spoke to the Business Desk on condition of anonymity, explained that this effectively meant construction would be among the hardest hit by the projected low economic growth. He said due to the continued non-payment for services rendered construction companies, would end up unable to take up new business opportunities since they would also be faced with serious cash flow challenges.

By extension, the economist said the financial services sector, wholesalers and retailers would also be affected because construction companies would no longer be able to service either their loans or credit agreements.      

“The economy heavily relies on government. When government faces cash flow challenges, the economy easily suffers because a lot of sectors are directly linked to it,” the economist explained.  

The economic deceleration will be against an economy that surpassed expectations last year. CBS said   preliminary estimates for Growth Domestic Product (GDP) reflect that overall economic activity expanded by 1.9 per cent in 2017 from 1.4 per cent in 2016, mainly supported by an improvement in the primary and secondary sectors.

These sectors mainly benefited from the improved weather conditions, particularly the above normal rains received in the last months of 2016 and early months of 2017 supported by a recovery in agricultural production, agro-processing, water supply and hydro-power generation.

In an effort to clear the arrears, Minister of Finance Martin Dlamini said government had introduced two new instruments that were offered to the market in 2016/17 and 2017/18, namely, the infrastructure bond and the supplier’s bond.

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