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Watch: Budget speech by the Minister for finance

Mr. Speaker, it is my great honour to present to this August house my second Budget Speech and National Budget Estimates for the 2020/2021 financial year at this, the 2nd session of the 11th Parliament of the Kingdom of Eswatini.

“I would like to thank God our creator for the peace and stability he has afforded our Kingdom. We are beholden to Our Lord’s grace and mercy as we chart a course through these challenging times.”

I would like to read a scripture from Psalm 1:1-3 ‘Blessed is the one who does not walk in step with the wicked or stand in the way that sinners take or sit in the company of mockers, but whose delight is in the law of the Lord, and who meditates on his law day and night. That person is like a tree planted by streams of water which yields its fruit in
season and whose leaf does not wither – whatever they do prospers.’

Mr. Speaker, I take this opportunity to extend my heartfelt gratitude to Their Majesties for the confidence and trust they have placed in me as the custodian of this key portfolio in Government. In particular, I would like to
thank His Majesty the King for being the unifying force in our Nation and giving us the mandate and direction as articulated in the Speech from the Throne. He has set out an ambitious agenda for us as a Nation, an agenda that highlights our strengths and is forward looking. His Majesty reminded
us that time is of the essence in our socio-economic transformation and that,
above all else, we must ‘keep moving forward’

Echoing His Majesty’s speech, there is no time to lose. The government and the economy cannot live beyond its means year after year. In the previous budget cycle Cabinet outlined a strategy to resuscitate the economy. This led to the launch of the Eswatini Strategic Roadmap 2019-2022 which aims to establish a policy framework that will ensure sustainable economic
development, financial stability and growth, ultimately improving the quality of life of the people of Eswatini. This strategy necessitates adjustments in the short to medium term to ensure long term sustainability.

Mr Speaker, government is committed to fiscal consolidation by finding ways and means to improve revenue inflows while trying to contain expenditure. However, fiscal adjustment alone cannot suffice; essential structural reforms in economic policy are integral to the adjustment process.

The focus of these reforms is on economic growth and stability. We must enable all sectors of our economy to attain a path of high and sustained inclusive growth.

Even though the focus of this year’s budget continues to be on building a resilient economy through fiscal consolidation, we are starting to see positive signs of growth reflecting a promise of “green shoots”. Government has introduced measures to rationalise expenditures and make unavoidable sacrifices to ensure long term growth and fiscal sustainability.

We are rising to this challenge and nurturing the seeds of progress, while ensuring that the preconditions for positive results are created. As Martin Luther King Jr. said
“human progress is neither automatic nor inevitable. Every step toward the goal of justice requires sacrifice, suffering, and struggle; the tireless exertions and passionate concern of dedicated individuals.” Likewise, for the government it has not been easy. Wages and salaries have been stagnated, budgets and overall spending have decelerated.

Mr. Speaker, government continues to face cash flow challenges, causing us not to meet our financial obligations on time. This has resulted in the accumulation of significant arrears which has placed a burden on suppliers of goods and services. This time last year, we had accumulated an arrears stock of E4.2bn. This excluded most of our arrears on capital projects and what has been referred to as “invoices in the drawers”.

We made it a priority to settle these outstanding payments, and last year, suppliers and service providers were called upon to re-submit these invoices and supporting documents for verification. The Internal Audit team and the Auditor General’s Office are now conducting a verification exercise for these invoices so that the payment process can proceed.

Mr. Speaker, I am pleased to inform this House that our efforts are showing signs of success as the total amount owed now stands at E2.2bn. This includes the old arrears, the “invoices in the drawers” and all outstanding capital payments. We acknowledge that while dealing with existing arrears is part of the problem, our efforts will be in vain unless we ensure that this does not happen in the future. To curtail and discourage any spending happening
outside of the budget and to improve overall budget execution government has instituted a new reporting structure whereby each ministry reports on execution to the Planning and Budgeting Committee once every two months. I commend my fellow Cabinet Ministers and their teams for the efforts that have gone into this process and the great improvement that is showing in this year’s budget spending.

While Eswatini is in a year of improved SACU receipts, we are committed to stay firm on the demanding course of fiscal adjustment we have set for ourselves. We will continue intensifying our efforts to eliminate our structural inefficiencies. We are cognisant of how cyclical buffers in SACU receipts create an illusion which leads to increases in expenditure. We are committed to using this temporarily larger fiscal head-room to cushion our reserves and meet our payment obligations.

Mr. Speaker, this budget is designed to improve the delivery of services and distribution of resources to all citizens in particular the vulnerable groups.

Mr. Speaker, His Majesty’s Government is committed to expanding the size
and scope of the private sector in Eswatini. The Eswatini Strategic Roadmap
and the National Development Plan speak volumes to our ambitions in this
area.

As His Majesty highlighted in His speech from the Throne, government has declared 2020 as the year of the micro, small and medium enterprises (MSMEs) and will develop this sector focusing on access to finance and markets, empowerment of citizens and provision of incentives for MSMEs.

The country needs to leverage on MSME’s potential to build an economy that works for everyone and it is essential that we create new jobs, protect and grow existing businesses and attract foreign direct investment. We must continue to focus on the challenges and opportunities that lie ahead in order to achieve His Majesty’s vision 2022.

RECENT ECONOMIC PERFORMANCE AND OUTLOOK
Mr. Speaker, I now present to this house the global and domestic economic developments.

International Developments
Mr. Speaker, according to the World Economic Outlook1, global economic
activity is on a downward trend. The IMF has revised downwards the global growth in 2019 to 2.9 percent, a record low since the global financial crisis in 2008. This can be attributed to increasing trade tensions, particularly between the world’s two largest economies, China and the USA, and higher
uncertainty surrounding trade and geo politics. Macroeconomic strain in several emerging markets and developing economies, in addition to structural factors such as low productivity growth and aging populations in advanced economies, are also contributing to the low economic activity. In 2020, according to the IMF the global growth is expected to improve slightly to 3.3 percent.

Regional Developments
In the Sub-Saharan Africa region, growth has been revised downward to 3.3percent in 2019 and 3.5 percent in 2020. The sluggish growth is largely attributed to the region’s two largest economies, Nigeria and South Africa, and the broader group of resource intensive economies. Further risk to growth for most Sub-Saharan African (SSA) economies include climate shocks such as severe droughts and flooding. Dwindling growth in the rest of SSA can weaken potential benefits Eswatini could yield from its continental neighbours.

Despite a moderate re-bound in the second quarter, growth is expected to be subdued in the Southern African region and the Republic of South Africa in particular, in 2019. This follows a negative first quarter, which reflected the larger than anticipated impact of labour strikes and energy supply issues in the mining sectors, coupled with weak agricultural production. South Africa
is Eswatini’s major trading partner and any developments in South Africa are likely to have an impact on Eswatini.

Domestic Developments
i. Economic Growth
On the domestic front, the latest figures indicate that economic activity was fairly resilient in 2019 and increased by an estimated 1.4 percent, in spite of the continued fiscal challenges and the weakening global demand. The positive growth during 2019 greatly benefitted from improved regional demand for the country’s major exports in key markets, including the
Republic of South Africa (RSA).

REVENUE AND EXPENDITURE FOR 2020/21
1. Revenue
Mr. Speaker, revenue forecasts for 2020/21 financial year are projected to be E21.2 billion, indicating an 18.4 percent increase from the E17.6 billion in 2019/20 financial year’s collection. A number of factors underpin the expected increase in collection. In particular, SACU receipts are expected to be E8.34 billion which is a 32.5 percent increase from the E6.3 billion
2019/20 financial year amount.

Mr. Speaker, in addition, these figures account for several proposed policy measures that were aimed at increasing revenue receipts. The timely approval of increases in taxation of alcohol and tobacco products, lotteries and gaming, road toll and fuel has seen revenue shifting on a slightly upward trend.

2. Expenditure
Mr. Speaker, total expenditure for the financial year 2020/21 is estimated
at E24.1 billion. This includes an amount of E2 billion for public debt payments. Appropriated recurrent expenditure is set to grow by E238 million compared to the 2019/20 financial year, now standing at E16.2 billion. The capital budget allocation is E6.4 billion in 2020/21, which is an increase of 12.4 percent compared to the 2019/20 financial year. Thus, the total
expenditure for financial year 2020/21 is E2.2 billion above the budgeted
expenditure for 2019/20, which is a 10.6 percent increase.

3. Fiscal Deficit
Mr. Speaker, the budget deficit for the financial year 2020/21 is projected at 3.6 percent of GDP. Our fiscal deficit is estimated to be E2.9 billion in 2020/21 financial year. This figure is in line with SADC Macroeconomic Convergence deficit target not exceeding 5 percent and
government intends to lower it further in the medium term.

APPROPRIATION
Mr. Speaker, by virtue of the responsibility entrusted in me as the Minister of Finance I now present to this August House the budget estimates for 2020/21 financial year.
i) Revenue and grants, E21.20 billion;
ii) Appropriated recurrent expenditure, E16.15 billion;
iii) Appropriated capital expenditure, E6.38 billion;
iv) Total expenditure, E24.08 billion; and
v) Deficit, E2.88 billion.

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