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2 MONTHS IMPORT COVER RESERVES LEFT

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EZULWINI – The low SACU receipts drove down the country’s gross official reserves by 31.2 per cent over the year ended March 2019 to reach E4.6 billion.


This was far lower when compared to a high of E6.6 billion in March 2018.
Explaining how the reserves decline came about Governor of the Central Bank of Eswatini (CBE) Majozi Sithole said the fall in reserves was largely attributed to lower Southern African Customs Union (SACU) receipts during the 2018/19 fiscal year.


The receipts were at E5.8 billion compared to E7.1 billion during the 2017/18 fiscal year.
Accordingly, the reserves were enough to cover 2.0 months of imports, lower than 3.2 months recorded the previous year.
“At this level, the import cover was below the internationally recommended level of three  months,” said Sithole in his address during presentation of the annual monetary policy statement at Happy Valley Hotel yesterday. 


The governor narrated that short to medium-term prospects for a turnaround in the reserves were positive as government’s cash flow challenges may ease somewhat as SACU receipts for the 2019/20 fiscal year were estimated to increase slightly.


“Coupled with fiscal consolidation measures and the implementation of initiatives by the Bank to boost the country’s reserves, the position is expected to be better for 2019/20,” Sithole emphasised.


It should be mentioned that while SACU receipts remain a relatively large contributor to government revenues, currently contributing 34 per cent of total revenue, SACU contributions to total revenue has been on a downward trend as Value Added Tax (VAT) and Pay As You Earn (PAYE) improve.


Sithole said the increase in revenue was set to come from improvements in Eswatini Revenue Authority (SRA) domestic collections and from the implementation of the new revenue measures.


Total revenue for 2019/20 were projected to reach E18.9 billion, marking an increase of about 17 per cent.
“The increase is as a result of the proposed revenue policies that are envisaged to be implemented during the 2019/20 fiscal year,” said Sithole.


In the budget speech for the 2019/20 financial year, Minister of Finance Neal Rijkenberg stated that Eswatini has a large shadow economy which accounts for approximately 37.4 per cent of Gross Domestic Product (GDP).


He lamented that this sector largely falls outside of the tax net which prompted a need to address the situation through revenue diversification and a broadening of the tax base.


Mentioned


He mentioned that this would include an increase in consumption taxes, such as an increase in the tax on fuel and the implementation of Value Added Tax on electricity.
The minister informed the nation that the expected growth in our domestic revenue base would come about as a result of higher collections in VAT, corporate tax and personal income tax.


Rijkenberg said taxes on goods and services excluding SACU receipts were expected to grow by 13.2 per cent to E4.8 billion. VAT was expected to grow by 17.3 per cent to E3.5 billion, as the country benefitted from the first full financial year of the higher 15 per cent rate..

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