South Africa Bails Out Neighboring Swaziland With $368 Million to Plug Gap

The South African Reserve Bank will facilitate the payment, the bank’s spokesman, Hlangeni Mathebula, said in a phone interview today from Pretoria, the capital. Central Bank of Swaziland Governor Martin Dlamini said by phone from Mbabane the “matter has not been finalized.”

Swaziland, a landlocked country of 1.2 million people bordering South Africa and Mozambique, raised taxes and cut state spending after losing a third of its revenue when the global economic crisis reduced trade and slashed income from a regional customs union that includes South Africa. The African Development Bank wanted the government to cut salaries to access a loan from the lender.

The Swazi currency, the lilangeni, is pegged one-to-one with the rand, which was less than 0.1 percent weaker at 6.7677 per dollar as of 1:30 p.m. in Johannesburg. The average yield on 182-day Treasury Bills jumped to 6.446 percent at a July 27 auction by Swaziland’s central bank from an average yield of 5.8 percent on Jan. 20. The equivalent notes by South Africa’s central bank were 5.72 percent on July 29. No competitive bids were received for 100 million emalangeni ($14.8 million) worth of 91-day and 182-day bills today, the country’s central bank said in an e-mailed statement.

Rubber Bullets

South Africa’s National Treasury will hold a news conference today on the loan, it said in an e-mailed statement. Labor unions in Swaziland and South Africa oppose a bailout that doesn’t have conditions to force Swaziland, sub-Saharan Africa’s last absolute monarchy, to introduce political reforms. South Africa is concerned a collapse in Swaziland may lead to a “flood” of immigrants across its border, Jerry Matjila, the director-general of South Africa’s international relations department, said June 22.

Police fired tear gas, rubber bullets and water cannons to break up anti-government riots in April and demonstrators, led by unions and civil-society groups, have warned of more protests. Labor groups are opposed to government plans to cut wages and want political parties to be unbanned and the country to hold multiparty elections.

The 43-year-old King Mswati III appoints the country’s prime minister, while its lawmakers aren’t allowed to belong to political parties. Mswati, who has ruled the nation for 25 years, has 14 wives and a personal fortune of $200 million, according to Forbes magazine.

Safe Peg

A potential South African aid package may include balance- of-payments support to boost reserves, Swaziland’s Dlamini said June 29. This would help it maintain its currency’s peg with the rand. The central bank transferred money from its reserves to help the government meet its obligations, according to Dlamini.

The European Union said the financial aid it gives to Swaziland is “ongoing” and doesn’t involve budget support to the country. The EU was responding to media reports today on its loans to Swaziland, the group’s delegation in the southern African nation said in an e-mailed statement. It pledged in 2007 to give Swaziland 2.2 billion rand in the six years through 2013, most of it to the sugar industry, the EU said.

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