* Swazi cabinet “scared” to cut state pay
* Pretoria denies agreeing bailout
* Pressure mounting on Africa’s last absolute monarch (Recasts throughout with Swazi minister comments)
By Ed Cropley
JOHANNESBURG, June 28 (Reuters) - Swaziland is too scared to slash civil servant wages to resolve an acute budget crunch because of the fallout that could accrue to Africa’s last absolute monarchy, Finance Minister Majozi Sithole said.
In a parliamentary address reported in Swazi media on Tuesday, Sithole said the International Monetary Fund (IMF) was putting the screws on King Mswati III’s unelected administration as a condition for any emergency bailout.
Top of the IMF’s reform list is taking the carving knife to Africa’s most bloated bureaucracy, with a wage bill that consumes a whopping 18 percent of gross domestic product.
Sithole said cuts were too much for the landlocked southern African nation, which has historically relied on revenues from a customs union with regional giant South Africa for nearly two-thirds of government funding.
“As Cabinet we are scared to cut the salaries, because we do not know what the consequences would be,” Sithole was quoted as saying in the Times of Swaziland. “We are scared, but that is what the IMF wants.”
The paper also said that if the government failed to secure emergency funding, it would “soon” run out of money and public sector salaries would have to be delayed or slashed in half.
That prospect is likely to stoke already unprecedented public anger against Mswati, who is insulated from the hardships of his 1.4 million compatriots by a personal fortune estimated at $200 million. He also has at least a dozen wives.
This year, his security forces have used water cannon and rubber bullets to disperse rare protests against his 25-year rule. Dozens of prominent students and democracy activists have been arrested.
So far, the government has kept its head above water by running up at least $180 million in unpaid bills and eating into central bank reserves, which stood at just over $500 million last month.
But drastically reduced customs receipts after a 2009 South African recession mean that situation cannot carry on forever, and the IMF does not appear to be in a forgiving mood.
“They have said we are behaving as if we do not need the money, as there are no signs of belt-tightening, salary cuts and many more,” Sithole said.
Mswati has also turned to neighbouring South Africa for help, but it is hard to see South Africa’s ruling ANC, a self-proclaimed champion of democracy in the region, writing blank cheques for a regime that has caused it diplomatic headaches for more than a decade.
South African opposition parties and the powerful COSATU union federation, which loathes Mswati, have made clear any aid should only be granted in the interests of regime change.
Swazi dissident groups said this week they had received “credible reports” that Pretoria had agreed a $1.2 billion emergency loan, although South Africa’s Treasury denied on Tuesday that was the case.
"While the South African government is in receipt of a loan request from Swaziland, as confirmed last week, no loan has been agreed to or granted to Swaziland," it said in a statement. (For more Africa cover visit: af.reuters.com. To comment on this story, email SouthAfrica.Newsroom@reuters.com) (Editing by Peter Graff)