Eswatini’s Fiscal Strategy: Cutting Waste, Boosting Revenue, and Driving Growth

The Eswatini Public Finance Review 2025 highlights the country's urgent need for fiscal reforms to enhance revenue mobilization, improve public spending efficiency, and reduce reliance on volatile SACU revenues. Key recommendations include tax system modernization, SOE restructuring, better public investment management, and healthcare reforms to drive sustainable, private sector-led growth.

The Eswatini Public Finance Review: Leveraging Fiscal Adjustment for Better Development Outcomes, published by the World Bank, the International Monetary Fund (IMF), and the Eswatini Ministry of Finance in 2025, provides an in-depth analysis of Eswatini’s economic and fiscal landscape. The report highlights the country’s transition from a private sector-driven economy to one heavily reliant on public spending, driven by a decline in foreign investment and increasing dependence on volatile Southern African Customs Union (SACU) revenue transfers. Between 1996 and 2020, GDP growth averaged 2.8%, down from the 8% annual growth seen between 1980 and 1994. Despite a post-pandemic rebound to 5.3% growth from 2021 to 2023, fundamental weaknesses remain, including rising public debt, high expenditure arrears, and inefficiencies in government spending. Public debt reached 40.4% of GDP in 2023, up from 15.8% in 2015, while expenditure arrears increased to 4.9% of GDP, reflecting a lack of fiscal discipline. To address these challenges, strong fiscal reforms are necessary to stabilize the economy, enhance public investment efficiency, and ensure sustainable private sector-led growth.

Boosting Revenue Without Stifling Growth

Eswatini’s total revenue collection, at 25% of GDP, appears strong, but its domestic tax base is weak, with SACU transfers accounting for a large share. Domestic tax collection is undermined by inefficiencies, high tax expenditures, and weak enforcement mechanisms. Tax exemptions and deductions amount to 13% of GDP, significantly reducing available revenue. Strengthening domestic tax collection while maintaining a competitive business environment is a priority. Key recommendations include reducing unnecessary tax exemptions, introducing a property tax, implementing a carbon tax, and improving digital tax administration. The Revenue Stabilization Fund must be fully implemented to smooth SACU revenue fluctuations and ensure stable budgetary planning. Additionally, modernizing tax compliance mechanisms through e-filing and automated collection systems can improve collection efficiency. A high-net-worth individual tax unit, modeled after Uganda’s successful initiative, could also enhance revenue collection from affluent individuals who have traditionally avoided full taxation. Strengthening tax enforcement, investigating evasion, and formalizing the informal economy are crucial steps toward achieving greater fiscal sustainability without increasing the burden on businesses.

Managing Public Spending More Effectively

With public expenditure reaching 30% of GDP, Eswatini spends more than most regional peers, but its inefficiencies limit developmental impact. A major issue is the high public wage bill, which accounts for 10.4% of GDP, significantly crowding out investment in infrastructure and social services. The education and healthcare sectors, despite significant funding, suffer from inefficiencies, leading to suboptimal human development outcomes. Additionally, low execution rates for capital projects and large budget transfers to inefficient state-owned enterprises (SOEs) worsen fiscal strain. Expenditure management must be improved through better budget execution, stricter spending controls, and enhanced transparency. Implementing an Integrated Financial Management Information System (IFMIS) and a Treasury Single Account will improve expenditure tracking and reduce financial leakages. Eliminating unnecessary SOE subsidies and focusing resources on productive investments will also be essential. By modernizing procurement systems and adopting digital payment mechanisms, the government can cut costs, reduce corruption, and enhance service delivery efficiency.

Investing in Infrastructure and Climate Resilience

Public investment, though essential for growth, has been hampered by inefficiencies, delays, and misaligned priorities. Capital expenditure has averaged 4.7% of GDP from 2018 to 2022, but weak project selection and execution undermine its impact. Many infrastructure projects suffer from cost overruns and long delays, such as the International Convention Centre, which has been under construction for over a decade. To improve public investment efficiency, the government must strengthen project feasibility studies, ensure better procurement oversight, and integrate climate resilience measures into infrastructure development. Climate-smart investment policies will help protect infrastructure from extreme weather events and ensure long-term sustainability. Establishing clearer institutional oversight in the Public Investment Management Unit and ensuring that projects align with national development goals are crucial for long-term economic stability. The IMF and World Bank’s Public Investment Management Assessment recommendations must be fully implemented to maximize capital investment impact.

Healthcare Reforms for a Stronger Future

Despite significant healthcare investments, Eswatini faces persistent inefficiencies and regional inequalities in access to healthcare services. Public healthcare spending accounts for 3.6% of GDP, but outcomes remain poor, with high maternal and infant mortality rates, frequent medical supply shortages, and misallocated resources. Many resources are diverted toward specialized and administrative costs rather than primary healthcare, reducing the efficiency of service delivery. To address these challenges, the government must increase funding for primary healthcare, improve supply chain management, and grant regional hospitals more autonomy in financial decision-making. Reorganizing the Ministry of Health’s administrative structure will allow local facilities to respond more effectively to community health needs. Implementing performance-based budgeting will enhance accountability and ensure healthcare funds are allocated efficiently based on measurable outcomes. The government must also invest in digital health records and e-procurement systems to improve efficiency and reduce costs.

A Roadmap to Stability and Growth

Eswatini’s fiscal challenges demand bold reforms and decisive action. The Fiscal Adjustment Plan (FAP), introduced in 2021, aimed to reduce deficits, enhance revenue collection, and rationalize public spending, but progress has been slow due to external shocks and delays in implementation. While SACU revenue windfalls in 2023 helped reduce the fiscal deficit from 6.3% to 2.1% of GDP, this improvement was temporary and not driven by structural reforms. Moving forward, the government must fully implement fiscal consolidation measures, strengthen tax administration, improve expenditure controls, and restructure inefficient SOEs. Clearing expenditure arrears and ensuring that future spending aligns with national development goals will be critical. Additionally, boosting investor confidence through sound fiscal policies and governance improvements will help attract foreign and domestic investment. With a clear strategy and strong institutional commitment, Eswatini can build a resilient economy, improve public service delivery, and achieve long-term, sustainable growth.