Statement by IMF Executive Directors at the Conclusion of their Visit to the Kingdom of Lesotho

Press Release No. 08/27
February 20, 2008

A mission of Executive Directors of the International Monetary Fund (IMF) comprising Messrs. Age Bakker, Peter Gakunu, Huayong Ge, Aleksei V. Mozhin, and Ms. Miranda Xafa issued the following statement today in Maseru at the conclusion of a visit to Lesotho:

"We are grateful for the opportunity to visit Lesotho and we thank His Majesty the King Letsie III, The Right Honorable Prime Minister Mosisili, Deputy Prime Minister Lesao Lehohla, Minister Thahane, Governor Senaoana and other honorable members of the Government and Senior officials of the Kingdom of Lesotho for their very warm hospitality. Our visit has provided us with a rare opportunity to learn more about Lesotho from our interactions with the authorities, the public and private sectors, and Lesotho's development partners. We discussed economic developments and the challenges Lesotho faces in its efforts to achieve high and sustainable growth necessary for a meaningful reduction in poverty. This will contribute significantly to our understanding in the IMF Executive Board, in assessing and discussing the development challenges of the country and the IMF's policy advice.

"In our meetings with His Majesty the King and the Right Honorable Prime Minister we congratulated them for their commitment to economic development and poverty reduction. We had productive discussions on Lesotho's economic prospects and development challenges.

"We commend Lesotho's authorities for their prudent macroeconomic management which has contributed to ensuring economic stability has translated into robust growth, strong fiscal and external positions, single digit inflation, and substantial reduction in debt level. We praise their efforts to promote economic growth through favorable improvements in the investment climate. We agreed with the authorities that achieving the sustainable, broad based economic growth necessary for the improvement of the living conditions of the majority of the Basotho people, remains a challenge. Private sector development is key for achieving growth and reducing poverty.

"We acknowledge that numerous challenges remain on the long road toward effective poverty reduction and sustainable economic growth. The overdependence on Southern African Customs Union (SACU) revenues (over 60 percent) and a global reduction in tariffs as a result of trade liberalization entail risks of revenue slowdown over time. Since the fall of the multifiber agreement, difficulties have piled up, prompting the need to refocus the textile sector and more generally diversify the sources of growth and exports. The need for further financial sector development was discussed, with a view to provide sound outlets for domestic savings and greater funds for domestic investment. The provision of well-supervised financial services and the raising of financial literacy was seen as essential to maintaining financial stability. We agreed with the authorities that productivity-enhancing infrastructure, job creation, fighting HIV/AIDS, and poverty reduction remain top priorities. We believe that with the continuation of prudent policies and the support of development partners, these challenges are not insurmountable.

"We reaffirm the IMF's commitment to continuing the excellent relationship with the Lesotho authorities."



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