The country’s economy is expected to grow at the rate of 1.6%, whilst population growth isexpected to record 2.9%, indicating that
the standard of living is not improving. In 2002, the average domestic inflation was 11.7%, compared to the previous year’s 7.5%. Inflation fell from 11.2% in January 2003, to 8.7% in April 2003. Of major concern is the continued increase in the country’s budget deficit, which will prompt a significant deterioration in the
balance of payments, a marked rundown on the country’s level of
reserves, as well as a sharp decline in business and investor confidence. Government projects a deficit of 3.5% of GDP for the 2003/04 fiscal year.
Swaziland’s monetary policy was unaltered, with domestic interest rates tracking those of South Africa, in order to preserve the integrity of the currency peg. Meanwhile, the current recovery of
the Lilangeni is a serious threat to exporters particularly the garment manufacturing and sugar industries. Some companies have already reported a sharp decrease in earnings because of the prevailing unfavourable exchange rates. Tibiyo is indirectly
exposed to foreign exchange risk as a significant percentage of its revenue comes from sugar.
The construction of factory shells by the government
had a positive effect in attracting business in the
textile industry. Initiatives such as the Africa
Growth and Opportunities Act (AGOA) and Generalised
System of Preferences (GSP), introduced
by the U.S. Government, have had a marked effect
on developing countries such as Swaziland, in
terms of providing employment opportunities and
the opening up of more markets.