MBABANE, 16 May 2011 (IRIN) - Swaziland's deepening financial crisis has already eroded public services, but those services may shut down entirely if the government fails to find money to pay its wage bill.

Finance minister Majozi Sithole told a state-run radio station on 9 May that the government would struggle to pay public service salaries at the end of the month, and that no money would be available for June or beyond unless the World Bank and the African Development Bank grant the loans the government has requested.

Civil servants and nurses' unions have already threatened to stop working if salaries are not paid on time.

"A security threat with regional implications comes when government cannot pay the army, police and the correctional services," said Manqoba Ginindza, who works at a local investment institution. "The slow deterioration of services we have seen all year will become an abrupt end to all services."

The average Swazi wage earner supports 10 individuals, so 100,000 people - one-tenth of the population - would be directly affected if the country's 10,000 civil servants were not paid.

If the largest group of wage earners stopped spending or investing, retailers could be left with unsold goods, and banks saddled with delinquent loans. Analysts said the knock-on effects to the economy could be far-reaching.

In January 2011 the International Monetary Fund (IMF) made a number of recommendations aimed at staving off economic disaster in Swaziland. Chief among them was that the bloated public sector workforce be cut to a size more suited to a small country's needs.

The government announced that it would cut 7,000 public service jobs during 2011, but so far has cut none. Even without the cuts, Swaziland's unemployment rate stands at 40 percent and more jobs have been lost since the beginning of the year as businesses that relied on government contracts have closed down.

Feeling the pinch

Swazis started feeling the pinch of the financial crisis in March, when the government suspended pensions for the elderly in order to pay school fees for orphans and vulnerable children (OVC).

Although the pensions have been reinstated, the Ministry of Education is still faced with a shortfall, which has delayed the payment of fees for the children's second term of school.

Nurses at the country's largest medical facility, the Mbabane Government Hospital, have announced that starting on 16 May they will hold daily pickets to protest the shortage of drugs and basic medical supplies like bandages.

The relatives of patients with wounds that need dressing have been forced to buy bandages at pharmacies, and nurses complain that they have exhausted the ways of stretching scarce resources.

Local media recently reported that the government did not have the money to maintain its large fleet of vehicles, which includes ambulances and tractors, and that many vehicles are likely to be taken out of service when they need new tyres and other spare parts.

Low hopes for recovery

Putting an end to the financial crisis and turning around the economy would take the kind of fundamental growth that Swaziland has not seen since the mid-1990s. Foreign direct investors have tended to shun the country in favour of its neighbours - the economically rebounding Mozambique and the regional powerhouse, South Africa.

When the African Growth and Opportunity Act (AGOA), a US preferential trade act, was launched a decade ago, it was hailed as a means of expanding Swaziland's economy by boosting the industrial sector.

Cyril Kunene, Principal Secretary in the Ministry of Commerce, Industry and Trade, recently told a press briefing that it had been a disappointment because the businesses that took advantage of AGOA were mainly Asian garment makers seeking entrance into the US market via Swaziland.

Their taxes were deferred as an inducement for investing in the country but the jobs their factories provided were unskilled and low-paying.

Swaziland's non-governmental sector is attempting to fill many of the gaps created by poor public service delivery, but the expectation that they will provide more is growing just as donor support for many such organizations is shrinking.

"When the money runs out government services will stop," the CEO of an Mbabane-based NGO, who declined to be named, told IRIN. "This means NGOs will be required to do even more to meet the health and social welfare needs of Swazis."