Swaziland crisis deepens as South Africa loan stalls

JOHANNESBURG (Reuters) - A cash crunch gripping Swaziland, Africa's last absolute monarchy, intensified on Friday after South Africa admitted it had not paid the first slice of an emergency 2.4 billion rand (211 million pounds) in August, as previously expected.

The absence of the loan, seen as the final lifeline for an unelected administration that appears to have run out of money, may mean civil servants receiving their pay late -- if at all -- piling more political pressure on King Mswati III.

Already the crisis has sparked unprecedented protests against the UK-educated monarch, who has at least a dozen wives and a personal fortune estimated at $200 million.

Security forces in the landlocked nation of 1.4 million people have used tear gas and baton charges to break up demonstrations, sparking condemnation from foreign governments and boosting the case of dissidents demanding regime change.

South African treasury officials, declined to say what had delayed the loan, or when it might be concluded.

"No money will be transferred until the paperwork has been signed," South African Treasury spokeswoman Kershia Singh said. "We were aiming for August. It's obviously taking longer than we anticipated."

The South African loan was unveiled a month ago after Mswati personally asked Pretoria for help, having tried and failed to get money out of lenders such as the International Monetary Fund (IMF).

The loan was heavily criticised by governing partners of South Africa's ruling African National Congress who said it propped up a repressive regime.

The IMF is demanding big cuts to what is officially Africa's most bloated bureaucracy, but this week gave a candid assessment of reforms, saying the government had missed several targets for reducing a Greece-style budget deficit of more than 14 percent of GDP.

The crisis has spilt into the wider economy, hitting growth and raising fears of a collapse of the currency and banking system if Swazis decide to empty their accounts and convert savings into rand, the most widely used hard currency.

The fiscal problems stem from a 2009 recession in South Africa that triggered a collapse in revenues from the SACU regional customs union that has historically accounted for two-thirds of Swaziland's budget.

The government has kept its head above water by using central bank reserves and running up at least $180 million in unpaid bills, but has made only half-hearted efforts to rein in spending on the military and royal household.

The government has hit its formal credit limit at the central bank, whose reserves amount to a paltry 2.2 months of import cover, but has continued to borrow, using its oil reserves as collateral.

The crisis has dealt a heavy blow on an already impoverished population.

The main university has been closed for months, and stocks of HIV/AIDS medications are thought to be down to about two months in a country with one of the highest infection rates.

(Editing by Marius Bosch)

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