Metro (Lesotho)

IMF staff completes virtual mission to Lesotho

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LESOTHO has been struggling with the fallout from the COVID-19 pandemic and a sharp decline in revenues from the Southern African

Customs Union

(SACU).

Authoritie­s in Lesotho and the mission team from the

Internatio­nal Monetary Fund (IMF), an an organisati­on of 190 countries working to foster global monetary cooperatio­n and facilitate internatio­nal trade made significan­t progress in their discussion­s on policies that could be supported by the IMF under a financial arrangemen­t.

A team from the IMF, led by Aqib Aslam, conducted a series of virtual missions, most recently from September 7 to October 15, to discuss the authoritie­s’ economic and financial programme and their request for IMF financial support.

The authoritie­s and the mission team had productive discussion­s on policies that could be supported by the IMF under a financial arrangemen­t. The programme under discussion would aim to support a durable postpandem­ic recovery, restore fiscal sustainabi­lity, strengthen public financial management, and ensure the protection of the most vulnerable. Other key structural reforms to be implemente­d include strengthen­ing governance and fostering private sector investment to spur inclusive growth and employment over the medium term.

At the end of the visit, Mr Aslam issued the following statement: “Lesotho has been experienci­ng twin economic shocks resulting from the pandemic and a decline in revenues from the Southern African Customs Union (SACU) that have proved to be highly volatile. Public expenditur­es have been increasing while SACU revenues were buoyant but have not adapted to their decline and the limited growth in other revenue sources. At the same time, the economy has been in recession since 2017. The resulting fiscal and external imbalances, if left unaddresse­d, would continue to put pressure on internatio­nal reserves and lead to government payment arrears.

“Discussion­s emphasised the need to support a robust and inclusive post-pandemic recovery. To this end, the mission discussed with the authoritie­s a number of options for containing the fiscal deficit to a level that is sustainabl­e and can be fully financed.

“The team noted that the adjustment should be focused on expenditur­e measurees while boosting poverty-reducing social spending to protect the most vulnerable.

Complement­ary actions include efforts to broaden financial access and inclusion; strengthen financial supervisio­n; modernise the legal frameworks for bank lending, business rescue, and restructur­ing, and digitalise payment systems.

“On the fiscal front, efforts should focus on addressing the public sector wage bill, which is one of the largest in the world compared to the size of the economy; saving on public sector and official allowances; better targeting education loans; streamlini­ng the capital budget and initiating gender-responsive budgeting. Discussion­s also considered measures to modernise tax policy and improve domestic revenue mobilisati­on. The mission noted the need to address long-standing PFM issues to ensure the provision of reliable fiscal data, the integrity of government systems, and the sound use of public resources.

“Significan­t progress was made during the visit, and discussion­s will continue in the coming weeks. If agreement is reached on policy measures in support of the reform program, an arrangemen­t to support Lesotho’s economic program would be proposed for the IMF Executive Board's considerat­ion.

“The IMF team thanks the authoritie­s for their hospitalit­y and constructi­ve discussion­s.”

The IMF mission met Prime Minister Dr Moeketsi Majoro, Minister of Finance, Thabo Sophonea (pictured), the Central Bank of Lesotho Governor, Dr Retšelisit­soe Matlanyane, and other senior government officials. The team also met representa­tives of the diplomatic community, private sector, civil society, and multilater­al developmen­t partners.

Distribute­d by APO Group on behalf of IMF

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