Johannesburg - The South African government has agreed to lend R2.5bn to Swaziland, Reserve Bank spokesperson Hlengani Mathebula said on Wednesday.
"This is a mutual agreement between the two governments and the South African Reserve Bank is the facilitating mechanism for the grant," Mathebula told Reuters, confirming reports in the Times of Swaziland newspaper.
South Africa agreed to lend Swaziland, Africa’s third-largest sugar producer, 2.5 billion rand ($368 million) to help its neighbor plug a budget shortfall, said Hlengani Mathebula, spokesman for South Africa’s central bank.
The South African Reserve Bank will facilitate the payment, 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.
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. Police fired tear gas and rubber bullets to break up anti-government riots in April.
Safe Peg
A potential South African aid package may also include balance-of-payments support to boost reserves, Swaziland’s central bank Governor Martin 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 Swazi currency, the lilangeni, is pegged one-to-one with the rand, which was 0.3 percent weaker at 6.7838 per dollar as of 11:10 a.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.
