Swaziland on Friday found its options narrowing to avoid financial collapse, turning to neighbouring South Africa for a bailout as the African Development Bank refused a $150 million loan request.
The African Development Bank (AfDB) on Thursday refused Swaziland the loan because the country has not met conditions set by International Monetary Fund, the finance minister said.
“Our sources say our request will only be considered once we meet the International Monetary Fund (IMF) benchmarks,” Finance Minister Majozi Sithole told the Times of Swaziland.
“President of the AfDB is yet to communicate to us, and I believe he is also considering other options so that when he communicates he will let us into the options,” said Sithole.
In a sign of how desperately Swaziland needs the cash, Sithole had urged the nation to pray on Tuesday for the loan's approval.
“This is a catastrophe for the hapless government,” the Times said in a comment.
Without a “letter of comfort” from the IMF, Africa's last absolute monarchy has little chance of getting loans from international institutions.
Swaziland is now left waiting to see whether neighbouring South Africa will offer a bailout to keep the tiny kingdom of 1.2 million people solvent.
South Africa's foreign ministry on Thursday confirmed that a loan request had been made, but declined to specify the amount.
Earlier reports had said that King Mswati III had asked President Jacob Zuma for a $1.4-billion (one-billion-euro) loan, which both countries denied.
The loan request places regional powerhouse South Africa in a delicate position.
South Africa doesn't want to see its neighbour's economy collapse, but the ruling African National Congress faces pressure from both its powerful labour union allies and the parliamentary opposition, who say Mswati should make democratic reforms first.
The opposition Democratic Alliance called on the Treasury “to consider very carefully under which conditions it would approve a loan to Swaziland.”
“Certainly, it should be made very clear that any financial assistance should go toward improving the lives of the Swazi people, and not to finance King Mswati III's lavish and indulgent lifestyle,” the party said in a statement.
In March, the IMF told Swaziland that it would have to put in place austerity measures, including cutting thousands of government jobs and reducing salaries, before loans will be approved.
Over the past few months the government has begun cutting the salaries of its top earners, including reducing the cabinet's pay by 10 percent.
Civil service unions are resisting salary cuts lower down the scale, arguing government top brass will not feel the pinch after they received generous perks last year.
The fiscal crisis was brought on by a 60 percent drop last year in revenues from a regional customs union, the government's main source of income.
That was partly because of a drop in regional trade, but mainly because of a change in the formula used to distribute customs earnings. The change was agreed to years ago, but Swaziland failed to budget for it.
Sithole also admitted in January that the state coffers were losing up to $11 million a month due to corruption.
Swaziland has drained its reserves to keep paying salaries for civil servants, who have staged a series of protests against moves to slash their wages.
That has turned the financial crisis into a political challenge for Mswati, Africa's last absolute monarch, as the labour protestors have begun demanding democratic reforms. - Sapa-AFP