Economy

MBABANE – The payment of the outstanding 85 per cent salary review backpay to civil servants in six weeks is expected to stimulate consumer spending, boost tax collections and provide relief to thousands of households.

The payment forms part of the salary review agreement between government and public sector unions, which provided for 15 per cent of the six-month backpay paid in October 2025, with the remaining 85 per cent due next month.

While individual payouts vary according to salary grade, employees in grades C to F stand to receive amounts ranging from approximately E14 968 to E174 733 in outstanding backpay. The largest payment is expected to go to employees in grade F5, while workers in lower grades will receive smaller but still significant amounts.

An economist described such large-scale salary injections as a fiscal stimulus, as they will increase disposable income and consumer demand within a short period.

He said the immediate beneficiaries will be civil servants and their families. However, the economist said the impact is expected to spread well beyond government employees.

He said: “Retailers are likely to experience increased sales as workers spend on household goods, groceries, furniture, electronics, school fees, building materials and motor vehicles. Service providers such as banks, insurance companies, transport operators and telecommunications firms will also benefit from higher spending.”

For many workers, he said, the payout may be used to settle debts accumulated during years of stagnant salaries. The economist projected that commercial banks, micro-lenders and retail credit providers are to see an increase in loan repayments and account settlements.

Also, he said property-related spending may also increase as some civil servants use part of the money for home improvements, land purchases or housing projects.

The ripple effect could be particularly significant in smaller towns and rural areas, he said, where government workers form a large portion of the formally employed population.

“Increased spending in these communities may create temporary business opportunities for small traders, transport operators and informal businesses. The positive economic effects, however, come at a substantial cost to the fiscus.” Government disclosed that implementing the salary review requires approximately E1.643 billion, with the current staggered implementation accounting for about E800 million.  The July payout is set to arrive at a time when government is already facing competing demands, including infrastructure development, healthcare services, education expenditure and debt obligations. The economist said large once-off expenditures can strain cash flows and reduce fiscal flexibility, especially if revenue growth does not keep pace with expenditure commitments. He said the payment will, therefore, represent a major test of government’s ability to balance employee compensation with broader developmental priorities. The economist said despite the large expenditure, government is also positioned to recover a significant portion of the money through taxation. He said a sizeable share of the backpay will be subject to pay-as-you-earn (PAYE), meaning workers will not receive the full gross amounts reflected in their salary adjustments.

He said employees in higher salary bands are expected to contribute substantially more in income tax because of the size of their backpay awards.

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Salary bands C–F: outstanding 85%; Backpay due in July 2026