By Peroshni Govender
MBABANE (Reuters) - Swazi police flooded the streets of the tiny southern African kingdom's capital Friday ahead of a protest by unions, civil servants and students calling on the government to resign.
Swaziland is in the grip of a serious financial crisis and civil servants fear they will not be paid this month after Africa's last absolute monarchy suffered a huge drop in income from the Southern African Customs Union.
Trade unions and opposition parties, which are officially banned, are demanding the government resign. Protesters were inspired by the uprisings in north Africa.
"Government corruption is draining our country," said Masuko Mario, President of the People's United Democratic Movement.
"We are here to demand the unbanning of political parties. We have no confidence in the government and want a new interim government to be put in place and for political parties to be unbanned."
Unemployment in the nation of 1.4 million people is about 40 percent, with 70 percent of the population living below the national poverty line.
In contrast, King Mswati III -- who has 14 wives -- has a personal fortune of $200 million (124 million pounds), according to Forbes magazine.
Hundreds of police officers and special armed units deployed on the streets of Mbabane and roads leading to a park where hundreds of protesters gathered were blocked off.
"We are inspired by the events in the Middle East and North Africa. This regime must be removed," said Sarah Dlamini, one of the protesters.
The International Monetary Fund said this month Swaziland faced big fiscal challenges in the current financial year, with its budget deficit soaring to a whopping 13 percent of GDP.
Salaries of civil servants have been frozen after the country -- Africa's third-biggest sugar producer -- suffered a 60 percent drop in income from the Southern African Customs Union, which accounts for two-thirds of state revenues.
Government sources told Reuters that 7,000 of the country's 35,000 civil servants would be retrenched in the next three years in an attempt to cut state spending on salaries.
A $145 million loan from the African Development Bank will only be granted if some IMF criteria, including reducing the state's wage bill, are met.
If the AfDB loan is not granted, the government, which has been dipping into central bank reserves to pay state wages, could be bankrupt by June or July.
The IMF expects economy to grow by a mere 0.5 percent in 2011 while inflation is likely to increase to around 8 percent.
(Writing by Marius Bosch; Editing by Ed Cropley)