Paradigm shift needed

Lesotho Times - - Leader -

IN this edi­tion, we run a story in which the In­ter­na­tional Mon­e­tary Fund (IMF) warns of a very bumpy eco­nomic ride ahead ow­ing to a mul­ti­plic­ity of fac­tors such as the slow­down in the South African econ­omy and re­duc­tion of South­ern African Cus­toms Union (SACU) rev­enues. While it is not the first time that the IMF has is­sued such a warn­ing, this time around IMF Mis­sion Chief for Le­sotho, David Dunn, sounds sterner, omi­nously cau­tion­ing that the coun­try was “speed­ing to­wards a fis­cal cliff”. We can only ig­nore such stark re­marks to our peril.

Among the cul­prits pre­cip­i­tat­ing the fis­cal cliff is the ever grow­ing gap be­tween govern­ment rev­enues and ex­pen­di­tures which Mr Dunn rightly deems as un­sus­tain­able. he called for the sys­tem­atic trim­ming of the civil ser­vice and re­form of its op­er­a­tions to en­sure it does not con­tinue to bog down the al­ready ema­ci­ated econ­omy. One of the big­gest down­sides of political coali­tions is their at­ten­dant need to please all and sundry re­sult­ing in blot­ted cab­i­nets. It is an im­peach­able fact that a small poor coun­try like Le­sotho can­not af­ford its cur­rent bloated cab­i­net of 35 min­is­ters and deputies and the high bur­den this brings on the fis­cus.

Le­sotho is also set to lose its African Growth and Op­por­tu­nity Act (AGOA)’S com­pet­i­tive ad­van­tage when a trade agree­ment be­tween the United States and Pa­cific Rim coun­tries is con­sum­mated. The agree­ment will al­low coun­tries like Viet­nam, with a much more com­pet­i­tive and ef­fi­cient ap­parel in­dus­try than Le­sotho or any other African coun­try for that mat­ter, the chance to en­joy the same priv­i­leges AGOA ben­e­fi­cia­ries cur­rently re­ceive. This will inevitably put our lo­cal tex­tile pro­duc­ers un­der se­vere pres­sure when pit­ted against coun­tries who can trans­port faster to the United States and can pro­duce qual­i­ta­tive goods at a much lower cost than us.

Mr Dunn is right that such po­ten­tial shocks to the econ­omy will re­quire fun­da­men­tal im­prove­ments in Le­sotho’s com­pet­i­tive­ness to avoid be­ing caught flat footed. With Fi­nance Min­is­ter Mam­pono Khaketla set to present the na­tional bud­get to­mor­row, the IMF’S warn­ing could not have come at a bet­ter time for Le­sotho. It is as clear as day that a paradigm shift, pol­icy changes and struc­tural re­forms are needed to turn the sit­u­a­tion around. It is im­per­a­tive and ur­gent that the econ­omy is res­cued from the cliff edge and a pos­si­ble tail­spin into re­ces­sion from which it might only bot­tom out af­ter some pro­tracted years of se­vere pain.

Fos­ter­ing fis­cal pru­dence will re­quire hard and un­pop­u­lar de­ci­sions. The govern­ment can­not sim­ply spend money it does not have and ex­pen­di­ture must match rev­enues to achieve fis­cal sus­tain­abil­ity. While it is a tough call to en­cap­su­late all es­sen­tial struc­tural re­forms in one swoop in a sin­gle bud­get pre­sen­ta­tion, Dr Khaketla nev­er­the­less has the op­por­tu­nity to set the tone right. Should the bud­get be crafted and sup­ported with fis­cal dis­ci­pline, some light will emerge at the end of the eco­nomic tun­nel.

But no eco­nomic re­forms will de­liver us to the promised land with­out first tack­ling the ele­phant in our na­tional room: our poi­sonous pol­i­tics. Le­sotho’s peren­nial tag as a by­word for political in­sta­bil­ity needs per­ma­nent oblit­er­a­tion. The govern­ment has an op­por­tu­nity, with the re­cently re­leased SADC Com­mis­sion of In­quiry re­port, to get things right. The world is watch­ing us. Fail­ure to im­ple­ment the SADC rec­om­men­da­tions in good faith will haunt us.

Only un­der a pro­gres­sive political frame­work can we achieve eco­nomic progress. The SADC re­port has cre­ated a good op­por­tu­nity to lay our political ghosts and prove to the world that de­spite all that has hap­pened, we are will­ing to pro­mote the rule of law with req­ui­site con­se­quences to trans­gres­sors. The rule of law is the in­dis­pens­able part­ner of that key in­gre­di­ent for growth and job cre­ation: FDI aka For­eign Di­rect In­vest­ment. In­deed the SADC re­port presents the govern­ment with a few tough in­con­ve­nient choices to make. But none can hardly be said to against the na­tional in­ter­est. So the ball is squarely in the govern­ment’s court. In a thriv­ing econ­omy, cit­i­zens see the folly of fight­ing each other and fo­cus on ex­ploit­ing the eco­nomic op­por­tu­ni­ties be­fore them. how­ever, if poverty and de­pri­va­tion re­main the or­der of the day, the spectre of political un­rest to the detri­ment of eco­nomic de­vel­op­ment lingers on.

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