Eswatini's fundamental policy challenge is to address the longstanding factors that have constrained growth and hindered broad-based improvements in living standards. Given the state's significant role in the economy, the build-up of macro imbalances, and slow improvements in social indicators, it is vital to reform fiscal policy to transition to faster, more inclusive, and sustainable private sector-led growth. Eswatini development prospects continue to hinge on its attractiveness as an investment destination relative to its neighbors. The government has an opportunity to address binding constraints on growth by pivoting from a state-led to a private sector-led development model through five fiscal pathways: (1) ensuring macroeconomic stability for greater competitiveness, including reforming the way the country collects and manages revenues to smooth expenditures and avoid disruptions caused by inconsistent funding (e.g., SACU)
(2) advancing fiscal reforms to encourage private investment through competition and market contestability
(3) improving public financial management to support fiscal consolidation and greater expenditure efficiency. Aligning budget allocations more closely with the government's stated development priorities would make public spending a more effective policy instrument, and enhanced financial oversight and better management of public procurement would further improve expenditure efficiency
(4) fiscal policies for building more productive physical capital through better public investment management
and (5) fiscal policies for building human capital.