COLA TO SLOWDOWN ECONOMIC GROWTH – ECONOMIST

MBABANE – The implementation of the Cost of Living Adjustment (CoLA) has potential to slowdown Eswatini’s economic recovery plan for the period of 2019 to 2020.

This is an economists’ view from the Southern African Research Foundation for Economic Development (SARFED). Regional Coordinator George Choongwa recounted that for the past decade, Eswatini has been the bracket of being one of the largest wage bills in the sub-Sahara Africa. The country is currently ranked the third largest following Lesotho and Namibia respectively. Choongwa pointed out that this has greatly contributed to the country’s sluggish economic performance for the past two decades as the country has been growing at less than 3.5 per cent annually. 

Expected

Choongwa said the three per cent adjustment in relation to the salary increment was expected to have a number of socio-economic effects. He mentioned that despite indications of improvement, the country was still faced with the challenge of high public spending mainly on wage bill which contributed to the fiscal deficit declined of about 7.4 per cent of Gross Domestic Product (GDP) in 2018 from 7.9 per cent in 2017 and has been financed by domestic borrowing, accumulating domestic arrears, and international reserve withdrawals.
However, the country’s total public debt increased from 19.6 per cent of GDP in June 2017 to 20.8 per cent of GDP in June 2018. Choongwa stated that since the country still has the largest civil service wage bill, the increase of three per cent would result in the proportional increase in total consumption of basic goods and services. “This would then have direct toll on the prices in the long run, hence making the poor poorer.

Increased

“This is because since the majority will have their salaries increased, basic commodities such as rent, food, transport and energy will attract a reciprocal pressure which will influence the producers to hike their respective prices,” said Choongwa.

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