Lesotho gripped in economic shock from declining revenues of SACU

Maseru, Lesotho (PANA) – Lesotho authorities must focus efforts on addressing the public sector wage bill, which is one of the largest in the world compared to the size of the economy, an International Monetary Fund (IMF) mission has recommended at the end of a two-week visit to the country’s capital, Maseru, to discuss the authorities’ economic and financial programme and possible financial support by the Fund.

“Lesotho has been experiencing an economic shock resulting from a decline in revenues from the Southern African Customs Union (SACU). Public expenditures increased rapidly while SACU revenues were buoyant but have not been reined in as SACU revenues fell after 2015, despite the lack of growth in other revenues sources.

The resulting fiscal and external imbalances, if not addressed promptly, would put pressure on international reserves and result in the build-up of government payment arrears,” remarked Mr. Joseph Thornton, who led the IMF mission.

In a statement at the conclusion of the visit late Wednesday, Mr. Thornton said the mission discussed with the authorities a number of options for containing the deficit to a level that can be fully financed, noting that the adjustment should be focused on expenditure measures, including efforts to address the huge public sector wage bill, while making efforts to ensure that the most vulnerable are protected.

The mission discussed other possible areas for savings, including on government travel, foreign embassies, and procurement.

Also, their discussions considered measures to modernize tax policy and improve the revenue system. According to Mr. Thornton, the mission noted the need to address long-standing public financial management issues to ensure the provision of reliable fiscal data and ensure sound use of public resources.

Noting the need to accelerate structural reforms to support growth and enhance job creation in Lesotho, the IMF mission has welcomed efforts to review the licensing regime to reduce red tape, modernize the legal framework governing credit, and review the role of the government in the economy.

“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 could be proposed for the IMF Executive Board's consideration,” Mr. Thornton’s statement concluded.
-0- PANA AR 6Sept2018

06 september 2018 06:40:09

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