Lerato Matheka
The International Monetary Fund (IMF) has warned Lesotho to look at measures to help the country eliminate financial waste.
The IMF team led by Joseph Thornton, IMF Mission Chief for Lesotho, visited Maseru during November 6-13, 2019.
The financial institution has indicated that Lesotho continues to face challenges in adjusting to lower Southern African Customs Union (SACU) revenue.
Restraining current spending and effective expenditure controls will be essential to maintain a sustainable fiscal position, while public investment should be carefully vetted and ensure progress in key development priorities, the team highlighted.
They visited Lesotho to discuss recent developments and the economic outlook in the context of its regular surveillance activities.
While the authorities efforts to maintain economic stability have ensured that international reserves remain at adequate levels, Lesotho continues to face challenges in adjusting to a context of lower SACU revenues. With sluggish growth limiting the potential for domestic tax receipts, an improved outlook for government finances will require strong policy actions on spending.
In this context, effective expenditure controls, including careful vetting of new projects and their financing, will be more important than ever. This particularly applies to large projects, such as the proposed new sports facilities, which have major implications for the country’s debt burden and fiscal sustainability. Investment should support the achievement of key development objectives, including growth, job creation, and poverty reduction, Thornton remarked adding that the constrained environment for government finances implies a need to keep public sector wages in check until such time as efforts to increase the size of the economy through private-sector driven growth can bear fruit.
Some savings may be generated by eliminating ghost workers. Other current expenditures, such as on travel and foreign embassies, should be reviewed with the aim of eliminating waste. At the same time, greater efforts should be made to ensure that budgetary allocations are sufficient to protect the most vulnerable, including from the effects of recent poor harvests.
Thornton in a statement indicated that discussions also focused on recent economic developments, budget execution and planning, and prospects for enhancing private sector investment.
The latter could be supported with further actions to strengthen governance and policy certainty, improving the provision of infrastructure and skills to meet the needs of the private sector, and enhancing the business environment, he said.
IMF team is scheduled to return to Lesotho in early 2020 for the annual consultation for IMF member countries.
Summary
- While the authorities efforts to maintain economic stability have ensured that international reserves remain at adequate levels, Lesotho continues to face challenges in adjusting to a context of lower SACU revenues.
- Investment should support the achievement of key development objectives, including growth, job creation, and poverty reduction, Thornton remarked adding that the constrained environment for government finances implies a need to keep public sector wages in check until such time as efforts to increase the size of the economy through private-sector driven growth can bear fruit.
- The latter could be supported with further actions to strengthen governance and policy certainty, improving the provision of infrastructure and skills to meet the needs of the private sector, and enhancing the business environment, he said.
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