Paradigm shift needed
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.