Eswatini’s Budget Rests on a Customs Cheque It Does Not Control

ESWATINI · ECONOMY

The IMF mission has put a number on a problem Eswatini has lived with for years. Public debt is heading for half of GDP, and 40 percent of revenue comes from a customs pool set elsewhere.

The fiscal plan on paper is credible. The exposure underneath it has not changed.

What the IMF mission found

The IMF team spent a fortnight in Mbabane, publishing its concluding statement on 5 August 2026. The headline figure is a budgeted deficit of 5.9 percent of GDP, an improvement on the 6.1 percent recorded the year before.

The mix matters more than the total. Higher public wages and interest costs used up savings made elsewhere, so the gain came mainly from stronger customs receipts.

Public debt is expected to hit 50 percent of GDP by year end, up from 44.7 percent a year before. For a country of 1.2 million people with a small tax base, that is a real shift.

The rise has been steep. Public debt stood at just 15.2 percent of GDP a decade ago, roughly a third of the level now projected.

The Fund noted that Cabinet has approved a Medium-Term Fiscal Framework. It targets a cumulative 6.2 percentage point improvement in the primary balance, excluding customs revenue, by the 2031/32 fiscal year.

The cheque that arrives from Pretoria

The single most important fact about Eswatini’s public finances is that it does not set most of its own revenue. About 40 percent of the total comes from SACU, the Southern African Customs Union.

SACU is often called the world’s oldest working customs union. It pools duties on goods entering its common area and pays them out by a formula weighted to each country’s trade.

In practice, South Africa’s import volumes decide the payout.

That produces revenue swings no finance minister in Mbabane can forecast or control. A strong year for South African imports is a windfall for Eswatini, and a weak one leaves a hole in the budget.

The Fund’s decision to measure Eswatini’s progress on a basis that excludes SACU revenue makes the point. Progress should be judged on what the government actually controls, not on a cheque written elsewhere.

A currency decided across the border

The lilangeni is pegged one-for-one to the South African rand, under a shared arrangement called the Common Monetary Area. Rands circulate freely in Eswatini and are accepted as legal tender there.

The peg buys credibility and price stability, and it costs independence in return. When South Africa’s central bank moves interest rates to manage inflation in Johannesburg, Eswatini’s rates move with it.

The result is a country with two of its three main economic levers, its currency and interest rates, set elsewhere. Government spending and taxation are the one lever genuinely in domestic hands, which is why the IMF’s attention lands there.

Where growth is supposed to come from

The near-term outlook is not bleak. An irrigation scheme called the Lower Usuthu project, paid for by two development banks, should help farming and construction.

Mining is expected to help too, through output from coal mines such as Maloma Colliery. Containment of foot-and-mouth disease also matters, because a single outbreak can shut export markets for livestock and beef.

Roads are the other plank. The African Development Bank is funding two gravel roads to be paved in the southeast, near Siphofaneni and Maloma.

Together the two roads run 106 kilometres, and the work is due to finish in 2030.

None of these projects alone changes the fiscal picture. Together they are the difference between a debt ratio that stabilises near half of GDP and one that keeps climbing.

Growth alone will not fix everything. Unemployment stood at 33.5 percent even as the economy grew close to 5 percent in 2025.

Faster growth has not automatically brought jobs for young people in Eswatini.

Why a country of 1.2 million matters to outside investors

Eswatini is small enough to be ignored and interesting enough not to be. It is a currency-peg economy, a customs union member and a monarchy running a modern fiscal plan all at once.

It is also a test of whether the customs union’s revenue-sharing formula can survive change. South Africa has periodically pushed to revise that formula, and any change would hit Eswatini and Lesotho hardest.

The kingdom rarely produces headlines. It produces documents, and those documents are where the risk is actually visible.

What to watch next

The first thing to watch is the SACU payout announced for the coming fiscal year. It moves Eswatini’s deficit more than any budget speech does.

The second is whether the fiscal plan survives contact with the public wage bill, the item that absorbed this year’s savings. The third is the debt ratio itself, since lenders watch its direction more than the 50 percent level alone.

Frequently Asked Questions

What did the 2026 IMF Article IV mission say about Eswatini?

The budget for the fiscal year to March 2027 shows a deficit of 5.9 percent of GDP. Public debt is expected to hit 50 percent of GDP by that year’s end.

Higher wages and interest payments used up savings made elsewhere in the budget.

How much of Eswatini’s revenue comes from SACU?

Around 40 percent of total government revenue comes from the Southern African Customs Union. Those receipts are set by a shared formula, not by Eswatini’s own government.

Is the lilangeni a floating currency?

No. It is pegged one-for-one to the South African rand under the Common Monetary Area.

That means interest rate decisions are effectively made by South Africa’s central bank.

What is the Medium-Term Fiscal Framework?

Cabinet approved the plan. It targets a 6.2 percentage point gain in the primary balance, excluding customs revenue, by the 2031/32 fiscal year.

What could lift growth in Eswatini?

The IMF points to irrigation investment financed by the African Development Bank and the European Investment Bank. It also points to coal mining and to containing foot-and-mouth disease among livestock.

Connected Coverage

Eswatini is part of the bigger race we watch in Africa: The New Scramble.

For the customs union it relies on, see SACU’s talks with India.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error

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