## 1. Public Sector Institutional Table

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### Summary of mission outcomes and priority recommendations
- Mission period: January 14–25, 2019.
- Purpose:
  - Review progress against recommendations of previous GFS TA missions (March and November 2016; May 2018).
  - Update the public sector institutional table.
  - Assist in incorporating reclassifications into the new GFS compilation file.
  - Review monthly and annual data covering April 1991 to March 2019.
  - Compile preliminary GFS from financial statements of Local Governments and select entities outside the budgetary central government (including the pension fund).
  - Develop a GFS improvement work plan for the next two years upon request from MOF Principal Secretary.
- Coordination and overlap:
  - Overlapped with AFRITAC South (AFS) PFM TA mission on IFMIS upgrade and new chart of accounts (CoA).
  - Attended AFS PFM mission meetings and reiterated prior GFS recommendations for CoA improvements.
  - Overlapped with IMF African Department’s (AFR) Article IV review mission.
- Key identified needs:
  - Broaden coverage of GFS beyond the budgetary central government to include local governments and autonomous entities to better capture revenue mobilization, resource allocations, drivers of the deficit, financing, and fiscal risks.
  - Build systems and processes for regular, granular collection and compilation of data beyond the budgetary central government.

### Priority recommendations (selected and by timing)
- June 2019
  - Formalize the GFS technical working group, assign responsibilities, and dedicate staff resources for the collection and compilation of GFS.
    - Responsible Institutions: MOF: Macro (lead), budget, treasury, IFMIS; CBL; BOS; Local Government.
- June 2019 and continuous
  - Regularly review and update the public sector institutional table for consistent use across all macroeconomic statistics.
    - Responsible Institutions: MOF: Macro (lead), Treasury, CBL, BOS.
- December 2019
  - Collect and compile data for EBUs and public corporations (including the Pension Fund) and continue compiling data for local governments.
    - Responsible Institutions: MOF: Macro (Lead), Treasury, Debt, PSD&FA, CBL, Local Government.
- Continuous
  - Follow through with implementation of TA recommendations.
    - Responsible Institutions: MOF: Macro.

### Mission findings on implementation and institutional arrangements
- Out of a total of 64 recommendations from recent GFS TA missions:
  - 8 were completed.
  - 14 were partly completed.
  - 2 were ongoing.
  - 40 were not done.
- Main constraint: lack of formal institutional arrangement and clear assignment of responsibilities to follow through with TA recommendations.
- A working group (MOF, CBL, BOS) was established to review and update the public sector institutional table, but progress in finalizing the list remains slow.

### Institutional coverage of the public sector
- Updated institutional table features:
  - Identifies 109 institutional units classified as controlled by the public sector.
    - 98 are non-market entities belonging to general government.
    - 11 are market entities forming public corporations.
- Augmentation sources:
  - Central Bank of Lesotho (CBL) list additions.
  - Ministry of Finance’s Accountant General consolidated financial statements.
- Extrabudgetary entities:
  - MOF identified 16 entities, of which 3 were identified by CBL as Public Nonfinancial corporations.
  - CBL identified 9 additional entities not in MOF’s list.
- Recommended next steps:
  - All macroeconomic statistics institutions (MOF, BOS, CBL) should review the list to confirm exhaustiveness and appropriate sectorization.
  - Finalize the public sector institutional table and use it consistently across macroeconomic statistics.

### GFS compilation for the budgetary central government — changes and reclassifications
- Compilation tool:
  - Upgraded the GFS compilation file (SGO_DB) to map source data from CBL, IFMIS, and Debt department into a detailed GFS statement of operations; includes output sheets for reporting to the GFS Yearbook (GFSY) and IMF STA high frequency databases.
- Reclassifications and quantitative impacts (where provided):
  - Rand monetary compensations reclassified from property tax to grants from foreign governments — averaged about 0.6 percent of GDP in the last five years.
  - Policy lending transactions added:
    - Interest repayments on on-lent funds added to property income under revenue, increasing receipts by about 0.06 percent of GDP.
    - New disbursements and repayments added to transactions in financial assets, net reduction in loans of 0.05 percent of GDP.
  - Unfunded social contributions (pension and gratuity benefits not transferred to PODCPF) reclassified from compensation of employees to employment related social benefits — amounted to about 1.5 percent of GDP on average in the last five years.
  - Transfers to PODCPF between 2008 and 2010 amounting 1.1 billion Maloti reclassified from pension liabilities in financing to capital transfers expense (other expense).
  - Capital budget transactions reclassified from expense to transactions in nonfinancial assets in accordance with GFSM 2014 — amounts reclassified averaged about 2.5 percent of GDP in the last five years.
    - Grant expense in the capital budget kept in expense as capital grants to ensure proper consolidation between government levels.
    - Purchases of goods and services expense increased by amounts initially recorded in the recurrent budget and added to transactions in nonfinancial assets — averaging about 0.2 percent of GDP in the last five years.
  - Interest payment on behalf of members of Parliament reclassified from interest expense to compensation of employees — amounts averaging less than 0.1 percent of GDP.
- Recording basis and accounts payable:
  - Since January 2018, expenditure data reflect commitments and transactions deemed to have completed the payment cycle from IFMIS status of funds report — closer to accrual than cash.
  - Accounts payable are now recorded under financing to bridge timing differences between commitment-basis expenditure and cash financing, computed as difference between IFMIS committed/paid and total payments through government accounts at CBL.
  - Accounts payable accumulation: about 0.4 percent of GDP in the last three months of FY 2017/18.
  - Cumulative reduction in payables: about 0.2 percent of GDP in the first 8 months of FY 2018/19.
- SACU receipts:
  - Kept as a separate revenue item for MOF internal reporting.
  - Recommended reclassification for reporting to STA:
    - Excise component to excises.
    - Customs component to customs duties.
    - Development component to grants from foreign governments.
  - Reclassifications incorporated into templates for GFSY and high frequency GFS reporting.
  - Note: apportioning used proportions that may not represent actual component shares; exact collection for each component may need confirmation.

### GFS accuracy and comprehensiveness — discrepancies and data gaps
- Statistical discrepancy between net lending/net borrowing and financing:
  - Initially averaged about 10 percent of GDP.
  - Reduced to a range between -2 and 2 percent of GDP in the last five years after correcting an error in the calculation of changes in government deposits in the banking system.
- Remaining sources of discrepancy and incompleteness:
  - Transactions not currently included: government’s equity participation in public and/or private corporations.
  - Coverage inconsistency between transactions above and below the line (above-the-line transactions narrower than below-the-line).
  - Changes in government deposits from externally funded projects not reflected in expenditure.
- Data source and revenue disaggregation issues:
  - New compilation approach since January 2018 uses CBL data for revenue with LRA proportions applied to disaggregate into income tax and taxes on goods and services; remaining revenue items treated as residual.
  - No grant revenue included due to source data challenges; possible interim approach considered: apportion budgeted grant amounts by month to reflect disbursements.
  - Current approach improves representation of cash collections but adversely affects accurate disaggregation of revenue components.
  - Efforts required to reflect more accurate revenue breakdown and include actual grant revenue for meaningful fiscal analysis.

### Further reducing the statistical discrepancy — causes and recommended phased actions
- Coverage discrepancy between above-the-line and below-the-line transactions:
  - Finding: Coverage above the line is lower than below the line because some budgetary central government entities are not included in IFMIS while they are included in change in government deposits.
  - Short-run (interim) recommendation:
    - Liaise with CBL to request commercial banks to provide aggregated monthly total deposits from entities of the central government not covered in IFMIS; remove those balances from the total government deposits from CBL’s Depository Corporations’ Survey (DCS) each month to match coverage.
  - Medium term recommendations:
    - Start collecting data directly from all budgetary central government entities not currently included in IFMIS by sending monthly questionnaires.
    - Include all those entities in the new IFMIS to be launched starting next year.
- Counterpart and other flow identification:
  - Revolving fund, trust monies:
    - Identify counterpart transactions on expense and transactions in nonfinancial assets pertaining to revolving funds and trust monies and incorporate these in the GFS compilation.
  - Other economic flows on government deposits:
    - Liaise with CBL to determine monthly what change in government deposits is due to revaluation and remove that from computation of change in government deposits.
  - Government equity participation/withdrawal:
    - Liaise with the private sector department to get historical data on equity acquisition and disposals and record those transactions regularly.
  - Capital grants and transactions in nonfinancial assets:
    - Collect data on grants revenue and corresponding expenditure from Budget, Accountant General, Ministry of Planning, and line ministries; incorporate collected data in fiscal statistics.
  - Externally funded government projects and change in deposits:
    - Use change in deposits for these projects to adjust transactions in nonfinancial assets (increase for drawdowns, decrease for accumulations) and provide CBL with lists of externally funded projects for monthly aggregate deposit reporting.
  - Debt assumptions and defaults:
    - Include data on debt assumptions (including members of Parliament loans assumption) and defaults on guaranteed debt, recording the counterpart capital transfers as appropriate.

### Consistency of domestic debt transactions and PSDS compilation findings
- Inconsistencies exist between MOF and CBL on domestic debt transactions.
  - Debt department recorded borrowing from the IMF as an external debt; mission recommended reclassifying it as domestic debt because it represented on-lending from CBL to MOF.
- Causes of discrepancies:
  - Lack of timeliness (and sometimes failure) to record debt information into IFMIS.
  - DMO manually records auction data into CS-DRMS, subject to mistakes.
  - Neither CBL nor DMO systematically record amounts of matured debt securities repaid and amounts rolled over.
  - Absence of detailed amortization information leads to differing assumptions between CBL and DMO and further increases discrepancies.
- Recommended actions:
  - Systematically record all debt transactions (new disbursements, repayments and amounts rolled-over) into CS-DRMS and IFMIS.
  - Reclassify funds on-lent to the government by the central bank as domestic debt.

### GFS compilation for Local Government
- Source data and coverage:
  - Mission assisted compilation of data for 10 district councils using financial statements for FY2017/18 and a template from the previous mission.
  - Developed a new template for Maseru City Council (MCC) and started compiling MCC GFS data for Fiscal Years 2013/14 through 2017/18.
- Recommended actions:
  - Complete the compilation of GFS data for MCC using the template and financial statements.
  - Aggregate compiled data for individual local governments and compile GFS statements for the Local Government sector for Fiscal Years 2016/17 and 2017/18: (1) statement on sources and uses of cash; (2) statement of operations; and (3) balance sheet.
- Basis of recording and classification issues:
  - Transactions broadly recorded on cash basis, with exceptions: some district councils include noncash transactions and stock positions (accounts payable); MCC includes accounts receivable.
  - District councils’ CoA distinguish expense categories and transactions in nonfinancial assets; MCC classifies all expenditures under emoluments, premises, supplies, establishment, transport, and projects — complicating aggregation.
- Data accuracy:
  - Compiled GFS for MCC include a large statistical discrepancy amounting to about 12 percent of MCC’s total expenditures in FY2013/14 (for which the mission completed the compilation).
  - Recommended action: Collaborate with MCC data providers to identify sources of discrepancies and incorporate corrections in the GFS compilation template.

### GFS compilation for Extrabudgetary Units
- Finding: No GFS for extrabudgetary units is currently compiled. MOF is in the process of collecting financial statements for identified extrabudgetary units.
- Recommendation: Expedite collection and start compiling GFS using a template similar to that developed for local governments.

### GFS compilation for the Pension Fund (PODCPF)
- Data and recording issues:
  - PODCPF financial statements indicate possible lags in receipt of social contributions from government, recognized as contributions payable in PODCPF statements; these may not currently be included as contributions payable in budgetary central government data.
- Funding shortfall:
  - An actuarial assessment indicated a funding shortfall of 7.1 billion Maloti. PODCPF is expected to commission another assessment to confirm the amount.
  - Current payments made to PODCPF as part of regular administrative expense support amount to 6.2 percent of pensionable income and include an estimated 3 percent meant for covering the fund’s shortfall.
  - Finding: The amount is insufficient to fully cover the shortfall in a foreseeable future.
  - Recommendation: MOF should coordinate with PODCPF to ascertain the exact shortfall amount and devise plans to close the funding gap. Exact recording of transactions in fiscal and debt data depends on decisions made to close the gap. Ensure amounts transferred to PODCPF not meant for future social benefits are reclassified and any contributions payable recorded appropriately in MOF’s GFS.
- Classification of transfers:
  - Current classification of all transfers to PODCPF as social contribution may not align with GFSM 2014 guidelines.
  - Details: 10 percent of pensionable income represents social contributions, with equal contributions from employees and employer. An additional 6.2 percent of pensionable income is collected and transferred, including 1 percent meant for reinsurance, about 2.2 percent for administrative expense, and 3 percent for covering the funding gap.
  - Recommendation: Transfers not meant for payment of social benefits or reinsurance should be reclassified from social contributions under compensation of employees to transfers not elsewhere classified (other expense).

### Revised Chart of Accounts (CoA) and new IFMIS — risks and recommendations
- Recommendation: Use the CoA update opportunity to align economic and functional classifications with GFSM 2014 economic classification; allow aggregation of transactions and stock positions, present stock positions by counterpart sectors; expand classification by votes to align with the public sector institutional table.
- Risk: Launch of new IFMIS starting with FY2019/20 may pose a risk to GFS compilation unless careful preparation is undertaken on data retrieval for fiscal reporting from the new system.
- Recommendation: Strong coordination required between system developers, departments responsible for oversight and maintenance, and users (including those responsible for GFS compilation) to ensure the new system can generate comprehensive data for fiscal reporting.

### Data dissemination and reporting
- Recommendation: Resume data dissemination to STA for the GFSY and high frequency GFS databases.
- Actionable items:
  - MOF may use data made available during the mission on annual and monthly historical data compiled during the mission for the budgetary central government, and local government data for FY 2017/18, to make submissions to STA.
  - Initiate debt data submission to the World Bank and IMF quarterly public-sector debt statistics (QPSDS) database; data compiled during the last GFS TA mission for QPSDS had not been disseminated.

### Mission action plan highlights and timeline of prioritized outcomes (selected)
- Institutional/governance:
  - H: Ensure planned revisions to the PFMAA guarantee framework to gather, consolidate, and disseminate fiscal data for general government and public sector. — 2019Q3
  - H: Establish a working group to coordinate implementation of the GFS work plan. — 2019Q1
  - H: Assign responsibilities for following up on TA recommendations and follow through. — 2019Q1
  - M: Coordinate the GFSM 2014 Migration Plan with national implementation of IPSAS. — Continuous
- Compilation targets (GFSM 2014 / PSDSG 2013):
  - H: Compile GFS for the budgetary central government following GFSM 2014. — 2019Q1
  - M: Compile GFS for extrabudgetary central government units. — 2019Q2
  - M: Compile GFS for local government units. — 2019Q1
  - M/H: Compile debt statistics for central and other government subsectors, with target completions between 2019Q1 and 2020Q3.
- Coverage and recording:
  - H: Start collecting regular data on parastatals and agencies classified as BCG entities. — 2019Q2
  - H: Identify and incorporate transactions not currently included in BCG statement (debt assumptions, on-lending, scholarships). — 2019Q1
  - H: Move towards recording transactions on a modified accrual/commitment basis and record accounts payable below the line. — 2019Q1
- Dissemination and consistency:
  - H: Resume timely dissemination of monthly GFS to the NSDP and annual GFS for GFSY. — 2019Q1
  - H: Reduce the statistical discrepancy to less than 1 percent of GDP. — 2019Q2
  - H: Ensure consistency between “MF_SGO_DB” and “MF_MTFF_DB” files; share databases among MOF, CBL, and BOS where feasible. — 2019Q1
- Historical series and documentation:
  - L: Update historical series for the budgetary central government consistent with GFSM 2014 guidelines. — 2019Q1
  - M: Start documenting GFS compilation procedures. — 2019Q2

### Implementation status of prior recommendations (summary from Appendices)
- Appendix I (March & November 2016 TA status as of January 2019):
  - Many recommendations remain partly done or not done across institutional table finalization, CoA revision, GFSM 2014 migration coordination, IFMIS bridge tables, local government integration, and dissemination practices.
  - Examples:
    - Recommendation 2: Review and finalize institutional table — Status: Partly done.
    - Recommendation 9: Revise COA and obtain TA review — Status: Done.
    - Recommendation 30: Share databases across MOF, CBL, BOS — Status: Partly done.
    - Recommendation 11 (Appendix II): Compile GFS for district councils — Status: Not done.
- Appendix III (implementation counts):
  - 2016 TA Missions: Done 6; Partly Done 9; Ongoing 2; Not done 26; Total 43.
  - 2018 TA Mission: Done 2; Partly Done 5; Ongoing 0; Not done 14; Total 21.
  - Aggregate for missions reported: 8 (12.5%) Done; 14 (21.9%) Partly Done; 2 (3.1%) Ongoing; 40 (62.5%) Not done; Total 64.

### Appendix IV — guidance on compiling GFS from financial statements (key steps and cautions)
- Main source statements: income statement, balance sheet, and cash flow statement; adjust private-sector accounting presentation to conform to GFSM 2014.
- Steps to compile GFS from financial statements:
  - (a) prepare bridge tables for the income statement, balance sheet, and cash flow statement;
  - (b) calculate changes between closing and opening balance sheet values for each asset and liability category;
  - (c) prepare derivation tables for major GFS aggregates;
  - (d) compile GFSM 2014 detail tables and summary statements;
  - (e) verify accuracy.
- Key classification and adjustment guidance:
  - Classify all items according to GFSM 2014; exclude other economic flows (revaluations, volume changes) from transactions.
  - Derive transactions in assets and liabilities from balance sheet changes, adjusting to remove other economic flows.
  - Treat provisions as other changes in the volume of assets; treat depreciation as a proxy for consumption of fixed capital only if no national accounts CFC data available.
- Verification checks:
  - Ensure net lending/borrowing equals both: (i) revenue minus expense minus transactions in nonfinancial assets; and (ii) net acquisitions of financial assets minus net incurrence of liabilities; record practical differences as a statistical discrepancy.
  - Ensure closing balance sheet = opening balance sheet + transactions + other economic flows.
- Common pitfalls:
  - Sign conventions differ between financial statements and GFSM 2014 — careful attention required.
  - Financing item signs have changed from GFSM 1986 to GFSM 2014; ensure correct interpretation.

*Source: Mission report (GFS TA mission, Maseru, January 14–25, 2019) — IMF staff and MOF, CBL, BOS inputs.*

### 1. Public Sector Institutional Table _________________________________________________________________7

### 1. Public Sector Institutional Table

### Summary of mission outcomes and priority recommendations
- Mission period: January 14–25, 2019.
- Purpose:
  - Review progress against recommendations of previous GFS TA missions (March and November 2016; May 2018).
  - Update the public sector institutional table.
  - Assist in incorporating reclassifications into the new GFS compilation file.
  - Review monthly and annual data covering April 1991 to March 2019.
  - Compile preliminary GFS from financial statements of Local Governments and select entities outside the budgetary central government (including the pension fund).
  - Develop a GFS improvement work plan for the next two years upon request from MOF Principal Secretary.
- Coordination and overlap:
  - Overlapped with AFRITAC South (AFS) PFM TA mission on IFMIS upgrade and new chart of accounts (CoA).
  - Attended AFS PFM mission meetings and reiterated prior GFS recommendations for CoA improvements.
  - Overlapped with IMF African Department’s (AFR) Article IV review mission.
- Key identified needs:
  - Broaden coverage of GFS beyond the budgetary central government to include local governments and autonomous entities to better capture revenue mobilization, resource allocations, drivers of the deficit, financing, and fiscal risks.
  - Build systems and processes for regular, granular collection and compilation of data beyond the budgetary central government.

### Priority recommendations (as presented in Table 1)
- June 2019
  - Formalizing the GFS technical working group, assigning responsibilities, and dedicating staff resources for the collection and compilation of GFS.
    - Responsible Institutions: MOF: Macro (lead), budget, treasury, IFMIS; CBL; BOS; Local Government.
- June 2019 and continuous
  - Regularly reviewing and updating the public sector institutional table for consistent use across all macroeconomic statistics (national accounts, monetary and financial statistics, external sector statistics, and government finance statistic).
    - Responsible Institutions: MOF: Macro (lead), Treasury, CBL, BOS.
- December 2019
  - Collecting and compiling data for EBUs and public corporations (including the Pension Fund) and continue compiling data for local governments.
    - Responsible Institutions: MOF: Macro (Lead), Treasury, Debt, PSD&FA, CBL, Local Government.
- Continuous
  - Following through with implementation of TA recommendations.
    - Responsible Institutions: MOF: Macro.

### Mission findings on implementation and institutional arrangements
- Out of a total of 64 recommendations from recent GFS TA missions:
  - 8 were completed.
  - 14 were partly completed.
  - 2 were ongoing.
  - 40 were not done.
- Main constraint: lack of formal institutional arrangement and clear assignment of responsibilities to follow through with TA recommendations.
- A working group (MOF, CBL, BOS) was established to review and update the public sector institutional table, but progress in finalizing the list remains slow.

### Institutional coverage of the public sector
- Updated institutional table features:
  - Identifies 109 institutional units classified as controlled by the public sector.
    - 98 are non-market entities belonging to general government.
    - 11 are market entities forming public corporations.
- Augmentation sources:
  - Central Bank of Lesotho (CBL) list additions.
  - Ministry of Finance’s Accountant General consolidated financial statements.
- Extrabudgetary entities:
  - MOF identified 16 entities, of which 3 were identified by CBL as Public Nonfinancial corporations.
  - CBL identified 9 additional entities not in MOF’s list.
- Recommended next steps:
  - All macroeconomic statistics institutions (MOF, BOS, CBL) should review the list to confirm exhaustiveness and appropriate sectorization.
  - Finalize the public sector institutional table and use it consistently across macroeconomic statistics.

### GFS compilation for the budgetary central government
- Upgraded the GFS compilation file (SGO_DB):
  - Maps source data from CBL, IFMIS, and Debt department into a detailed GFS statement of operations.
  - Includes output sheets for reporting to the GFS Yearbook (GFSY) and IMF STA high frequency databases.
  - Incorporated prior recommended reclassifications and previously excluded data where available.

- Reclassifications and additions made to the compilation file (with quantitative impacts where provided):
  - Rand monetary compensations reclassified from property tax to grants from foreign governments — averaged about 0.6 percent of GDP in the last five years.
  - Policy lending transactions added:
    - Interest repayments on on-lent funds added to property income under revenue, increasing receipts by about 0.06 percent of GDP.
    - New disbursements and repayments added to transactions in financial assets, net reduction in loans of 0.05 percent of GDP.
  - Unfunded social contributions (pension and gratuity benefits not transferred to PODCPF) reclassified from compensation of employees to employment related social benefits — amounted to about 1.5 percent of GDP on average in the last five years.
  - Transfers to PODCPF between 2008 and 2010 amounting 1.1 billion Maloti reclassified from pension liabilities in financing to capital transfers expense (other expense).
  - Capital budget transactions reclassified from expense to transactions in nonfinancial assets in accordance with GFSM 2014 — amounts reclassified averaged about 2.5 percent of GDP in the last five years.
    - Grant expense in the capital budget kept in expense as capital grants to ensure proper consolidation between government levels.
    - Purchases of goods and services expense increased by amounts initially recorded in the recurrent budget and added to transactions in nonfinancial assets — averaging about 0.2 percent of GDP in the last five years.
  - Interest payment on behalf of members of Parliament reclassified from interest expense to compensation of employees — amounts averaging less than 0.1 percent of GDP.
  - Change of recording basis for expenditure and nonfinancial asset transactions and recording of accounts payable:
    - Since January 2018, expenditure data reflect commitments and transactions deemed to have completed the payment cycle from IFMIS status of funds report — closer to accrual than cash.
    - Accounts payable are now recorded under financing to bridge timing differences between commitment-basis expenditure and cash financing, computed as difference between IFMIS committed/paid and total payments through government accounts at CBL.
    - Accounts payable accumulation: about 0.4 percent of GDP in the last three months of FY 2017/18.
    - Cumulative reduction in payables: about 0.2 percent of GDP in the first 8 months of FY 2018/19.
  - SACU receipts:
    - Kept as a separate revenue item for MOF internal reporting.
    - Recommended reclassification for reporting to STA:
      - Excise component to excises.
      - Customs component to customs duties.
      - Development component to grants from foreign governments.
    - Reclassifications incorporated into templates for GFSY and high frequency GFS reporting.
    - Note: apportioning used proportions that may not represent actual component shares; exact collection for each component may need confirmation.

### GFS accuracy and comprehensiveness
- Statistical discrepancy between net lending/net borrowing and financing:
  - Initially averaged about 10 percent of GDP.
  - Reduced to a range between -2 and 2 percent of GDP in the last five years after correcting an error in the calculation of changes in government deposits in the banking system.
- Remaining sources of discrepancy and incompleteness:
  - Transactions not currently included: government’s equity participation in public and/or private corporations.
  - Coverage inconsistency between transactions above and below the line (above-the-line transactions narrower than below-the-line).
  - Changes in government deposits from externally funded projects not reflected in expenditure.
- Data source and revenue disaggregation issues:
  - New compilation approach since January 2018 uses CBL data for revenue with LRA proportions applied to disaggregate into income tax and taxes on goods and services; remaining revenue items treated as residual.
  - No grant revenue included due to source data challenges; possible interim approach considered: apportion budgeted grant amounts by month to reflect disbursements.
  - Current approach improves representation of cash collections but adversely affects accurate disaggregation of revenue components.
  - Efforts required to reflect more accurate revenue breakdown and include actual grant revenue for meaningful fiscal analysis.

*Source: Mission report (GFS TA mission, Maseru, January 14–25, 2019) — IMF staff and MOF, CBL, BOS inputs.*

### 13. Further reducing the statistical discrepancy will require concerted efforts from

### 13. Further reducing the statistical discrepancy will require concerted efforts from

### Coverage discrepancy between above-the-line and below-the-line transactions
- Finding: Coverage above the line (institutional units for which revenue and expenditure are recorded) is lower than that below the line (institutional units included in the change in government deposits from CBL and commercial banks).
- Cause: Some budgetary central government entities are not included in the current scope of data from the IFMIS, while they are included in the change in government deposits. Some entities are included in CBL and commercial banks deposits as “central government” but their revenue and expenditure transactions are not included in the IFMIS and therefore not in the GFS compilation file.
- Likely characteristic of excluded entities: Being grant aided entities, with grants from the budgetary central government as their main source of revenue, and collecting little revenue on their own (except presumably some extrabudgetary units).
- Recommended phased approach:
  - Short run (interim): Liaise with CBL and ask to request commercial banks to provide aggregated monthly total deposits from all those entities of the central government not covered in the IFMIS; remove those balances from the total government deposits from the CBL’s Depository Corporations’ Survey (DCS) each month to match coverage below the line with above the line.
  - Medium term:
    - Start collecting data directly from all budgetary central government entities not currently included in the IFMIS by sending monthly data requests in the form of a questionnaire.
    - Include all those entities in the new IFMIS to be launched starting next year, to have direct access to the data.

### Counterpart and other flow identification
- Revolving fund, trust monies:
  - Finding: Deposits accumulation and drawdown from the revolving fund (including students’ scholarship repayments) and trust monies show under changes in government deposits, but no counterpart transaction is currently included in the GFS compiled.
  - Recommendation: Identify counterpart transactions on expense and transactions in nonfinancial assets pertaining to the revolving fund and trust monies and incorporate those transactions pertaining to the budgetary central government in the GFS compilation.
- Other economic flows on government deposits:
  - Finding: Current recording of change in government deposits assumes there are no other economic flows, despite government deposits in foreign currency being subject to revaluation (holding gains/losses – revaluation, and volume change).
  - Recommendation: Liaise with CBL to determine monthly what change in government deposits is due to revaluation and remove that from the computation of the change in government deposits.
- Government equity participation/withdrawal:
  - Finding: Current GFS compilation file does not include any data on acquisition and disposal of equity.
  - Recommendation: Liaise with the private sector department to get historical data on equity acquisition and disposals as far back as data availability permits and record those transactions in the GFS compilation on a regular basis.
- Capital grants and transactions in nonfinancial assets:
  - Finding: Compilation prior to January 2018 assumed that all capital grants revenue in the budget were disbursed and the same amount recorded as spent. No data is yet recorded on capital grants revenue and associated transactions in nonfinancial assets in the data starting in January 2018.
  - Recommendation: Collect data on grants revenue and corresponding expenditure in coordination with the Budget and Accountant General’s departments at the Ministry of Finance, and the Ministry of Planning; from line ministries implementing externally funded projects. Incorporate collected data in fiscal statistics.
- Externally funded government projects and change in deposits:
  - Finding: Change in government deposits includes deposits of externally funded government projects for which the change in deposits may relate to disbursements pertaining to a previous fiscal year, creating a statistical discrepancy since there may be no associated expenditure recorded.
  - Recommendation: Use change in deposits for these projects, when available, to increase transactions in nonfinancial assets (for drawdowns) and decrease transactions in nonfinancial assets (for accumulations). Ministry of Finance should work with Ministry of Planning and line ministries to provide lists of externally funded projects to CBL for monthly (aggregate) deposit reporting.
- Debt assumptions and defaults:
  - Finding: Only changes to debt liabilities are currently recorded, while counterpart capital transfers (when government assumes members of Parliament loans or defaults on guaranteed debt) are not recorded as expense.
  - Recommendation: Include data on debt assumptions (including members of Parliament loans assumption as and when there is a change in Parliament and parliamentarians’ loans are assumed by government) and defaults on guaranteed debt, recording the counterpart capital transfers as appropriate.

### Consistency of domestic debt transactions
- Finding: Inconsistencies exist between the Ministry of Finance and the CBL on domestic debt transactions. Debt department recorded borrowing from the IMF as an external debt; mission recommended reclassifying it as domestic debt because it represented on-lending from CBL to the Ministry of Finance.
- Issue: Inconsistencies on domestic debt service may stem from data extracted from CS-DRMS differing from those from CBL.
- Recommendation: Explain and resolve inconsistencies as appropriate; reclassify funds on-lent to the government by the central bank as domestic debt.

### GFS compilation for the Local Government
- Source data and coverage:
  - Mission assisted compilation of data for 10 district councils using financial statements for FY2017/18 and a template from the previous mission.
  - Developed a new template for Maseru City Council (MCC) due to major differences in presentation and used it to start compiling MCC GFS data for Fiscal Years 2013/14 through 2017/18.
- Recommended actions:
  - Complete the compilation of GFS data for MCC using the template and available financial statements.
  - Aggregate compiled data for individual local governments and compile GFS statements for the Local Government sector for Fiscal Years 2016/17 and 2017/18: (1) statement on sources and uses of cash; (2) statement of operations; and (3) balance sheet.
- Basis of recording:
  - Transactions broadly recorded on cash basis, with exceptions. Some district councils’ financial statements include noncash transactions and stock positions (accounts payable); MCC financial statements include transactions on accounts receivable.
- Classification:
  - District councils’ chart of accounts distinguish expense categories and transactions in nonfinancial assets; MCC’s financial statements classify all expenditures under subcategories: emoluments, premises, supplies, establishment, transport, and projects. This complicates aggregation and warranted a specific MCC template.
- Data accuracy:
  - Finding: Compiled GFS for MCC include a large statistical discrepancy amounting to about 12 percent of MCC’s total expenditures in FY2013/14 for which the mission completed the compilation.
  - Recommended action: In collaboration with MCC data providers, identify sources of discrepancies (transactions not included in financial statements and potential errors) and incorporate them in the GFS compilation template.

### GFS compilation for Extrabudgetary Units
- Finding: No GFS for extrabudgetary units is currently compiled. MOF is in the process of collecting financial statements for identified extrabudgetary units.
- Recommendation: Expedite collection and start compiling GFS using a template similar to that developed for local governments. Appendix IV provides an overview on compilation of GFS from financial statements.

### GFS compilation for the Pension Fund (PODCPF)
- Data and recording issues:
  - Finding: PODCPF financial statements indicate possible lags in receipt of social contributions from government, recognized as contributions payable in PODCPF statements; these may not currently be included as contributions payable in budgetary central government data.
- Funding shortfall:
  - Finding: An actuarial assessment indicated a funding shortfall of 7.1 billion Maloti. PODCPF is expected to commission another assessment to confirm the amount.
  - Current payments made to PODCPF as part of regular administrative expense support amount to 6.2 percent of pensionable income and include an estimated 3 percent meant for covering the fund’s shortfall.
  - Finding: The amount is insufficient to fully cover the shortfall in a foreseeable future.
  - Recommendation: Ministry of Finance should coordinate with PODCPF to ascertain the exact shortfall amount and devise plans to close the funding gap. The exact recording of transactions in fiscal and debt data depends on the decision made to close the gap. Ensure amounts transferred to PODCPF not meant for future social benefits are reclassified and any contributions payable recorded appropriately in the Ministry of Finance’s GFS.
- Classification of transfers:
  - Finding: Current classification of all transfers to PODCPF as social contribution may not align with GFSM 2014 guidelines.
  - Details: 10 percent of pensionable income represents social contributions, with equal contributions from employees and employer. An additional 6.2 percent of pensionable income is collected and transferred, including 1 percent meant for reinsurance, about 2.2 percent for administrative expense, and 3 percent for covering the funding gap of the fund.
  - Recommendation: Transfers not meant for payment of social benefits or reinsurance should be reclassified from social contributions under compensation of employees to transfers not elsewhere classified (other expense).

### Revised Chart of Accounts (CoA) and new IFMIS
- Recommendation: Use opportunity of CoA update to align economic and functional classifications with GFSM 2014 economic classification; allow aggregation of transactions and stock positions, present stock positions by counterpart sectors; expand classification by votes to align with the public sector institutional table.
- Risk: Launch of new IFMIS starting with FY2019/20 may pose a risk to GFS compilation unless careful preparation is undertaken on data retrieval for fiscal reporting from the new system.
- Recommendation: Strong coordination required between system developers, departments responsible for oversight and maintenance, and users (including those responsible for GFS compilation) to ensure the new system can generate comprehensive data for fiscal reporting.

### Public-Sector Debt Statistics (PSDS) compilation
- Finding: Progress with compilation of debt statistics remains slow with coverage and accuracy issues. Differences in domestic debt data from DMO, IFMIS, and CBL exist.
- Causes: Lack of timeliness (and sometimes failure) to record debt information into IFMIS; DMO manually records auction data into CS-DRMS, subject to mistakes; neither CBL nor DMO systematically record amounts of matured debt securities repaid and amounts rolled over.
- Consequence: Absence of detailed amortization information leads to differing assumptions between CBL and DMO and further increases discrepancies.
- Specific correction needed: Funds on-lent to the government by the CBL (specifically funds disbursed by the IMF in past arrangements) were recorded as external debt but are liabilities of the government to the central bank; mission advised reclassification.
- Debt reorganization and assumptions:
  - Finding: Liabilities of Parliamentarians, members of the Senate and Statutory bodies assumed by government twice in the past (in 2015 and 2017) did not increase domestic debt numbers because creditors were directly repaid. Government had guaranteed farmers’ debt and paid banks when farmers defaulted.
- Recommended actions:
  - Systematically record all debt transactions (new disbursements, repayments and amounts rolled-over) into the CS-DRMS and the IFMIS.
  - Reclassify funds on-lent to the government by the central bank as domestic debt.

### Data dissemination
- Recommendation: Resume data dissemination to STA for the GFSY and high frequency GFS databases.
- Actionable items: Ministry of Finance may use data made available during the mission on annual and monthly historical data compiled during the mission for the budgetary central government, and local government data for FY 2017/18, to make submissions to STA.
- Additional recommendation: Initiate debt data submission to the World Bank and IMF quarterly public-sector debt statistics (QPSDS) database; data compiled during the last GFS TA mission for QPSDS had not been disseminated.

*Source: Mission report excerpts (Kingdom of Lesotho — International Monetary Fund).*

### 28. Upon request from the Principle Secretary, Ministry of Finance, the mission assisted

### 1lsoea2019002 - 28. Upon request from the Principle Secretary, Ministry of Finance, the mission assisted

### Outcome: The legal and institutional environment is conducive to compiling macroeconomic and financial statistics; the relevance and practical utility of existing macroeconomic and financial statistics are monitored; Management processes are in place to monitor the quality of macroeconomic and financial statistics; and Institutional Integrity, Transparency, and Ethical Practices meet statistical standards.
- H: The MOF should ensure that planned revisions to the PFMAA guarantees the framework to gather, consolidate, and disseminate fiscal data for general government as well as the public sector of Lesotho. — 2019Q3
- H: Establish a working group comprised of the Accountant General’s Office, the Treasury, the Budget Department and the MOF’s Macroeconomic Policy and Management Department, the CBL’s Research Department, the BOS, and the Ministry of Local Government responsible for coordinating the implementation of the GFS work plan. — 2019Q1
- H: Assign responsibilities for following up on TA recommendations and follow through with implementation of recommendations. — 2019Q1
- M: Coordinate the GFSM 2014 Migration Plan with the national implementation of IPSAS. — Continuous

### Outcome: Data are compiled using the concepts and definitions of the latest manual/guide
- H: Compile GFS for the budgetary central government following the GFSM 2014 framework, concepts and definitions. — 2019Q1
- M: Compile GFS for extrabudgetary central government units following the GFSM 2014 framework, concepts and definitions. — 2019Q2
- M: Compile GFS for local government units following the GFSM 2014 framework, concepts and definitions. — 2019Q1
- M: Compile GFS for the general government following the GFSM 2014 framework, concepts and definitions. — 2019Q3
- H: Compile debt Statistics for the budgetary central government following the PSDSG 2013 framework, concepts, and definitions. — 2019Q1
- M: Compile debt Statistics for the extrabudgetary units following the PSDSG 2013 framework, concepts, and definitions. — 2019Q3
- M: Compile debt Statistics for the local government following the PSDSG 2013 framework, concepts, and definitions. — 2019Q3
- M: Compile debt Statistics for the general government following the PSDSG 2013 framework, concepts, and definitions. — 2020Q3
- H: Develop a migration path and timetable to adopt the GFSM 2014 guidelines and seek senior management endorsement. — 2019Q1

### Outcome: Data are compiled using the coverage and scope of the latest manual/guide
- H: Start collecting on a more regular basis data on transactions for all parastatals and agencies classified as BCG entities and incorporate the data into the BCG statement of operations. — 2019Q2
- H: Identify all transactions not currently included, or partially included in the BCG statement of operations (i.e., (i) debt assumptions and debt payment on behalf of members of Parliament, (ii) on-lending) and incorporate them, and also adjust data historically to further reduced the statistical discrepancy. — 2019Q1
- H: Collect data on students' scholarships payments, and repayments and reclassify transactions accordingly in the budgetary central government GFS to further reduce the statistical discrepancy. — 2019Q1
- H: Identify counterpart transactions on expense and transactions in nonfinancial assets pertaining to the revolving fund, and trust monies and incorporate those transactions pertaining to the budgetary central government in the GFS compiled to further reduce the statistical discrepancy. — 2019Q1
- M: Collect data on a regular basis for the compilation of GFS for extrabudgetary units. — 2019Q2
- M: Integrate all local governments financial data in the new IFMIS. — 2020Q1
- M: Collect data on a regular basis for the compilation of GFS for local governments. — 2019Q1
- M: Obtain detailed data on recurrent expense of district councils, both from the IFMIS and local governments execution, in order to adequately classify grants from the BCG to local governments, derive and classify recurrent expense of local governments according to their economic nature, and consolidate the transfer in data for general government. — 2019Q1
- M: Collect detailed data on investment expense of district councils from foreign aid projects to adequately classify them into the respective economic expense categories. — 2019Q3
- M: Collect data and compile a financial balance sheet for the budgetary central government. — 2019Q2
- H: Collect and compile debt statistics for public financial and public nonfinancial corporations. — 2019Q3
- M: Source data for “other accounts payable”, “guarantees” and “pensions” should be obtained and then organized into a dataset to improve compilation, validation, and dissemination of public sector debt data by the Ministry of Finance. — 2019Q2
- H: Regularly fill the QPSDS reporting template with debt data for central government, general government, and public sector. — 2019Q1
- H: Start disseminating debt statistics on a quarterly basis to the World Bank PSDS database. — 2019Q1

### Outcome: Data are compiled using the classification of the latest manual/guide
- H: Ensure to continue reclassifying transactions in the budgetary central government GFS to comply with the GFSM 2014 guidelines such that: (i) Rand monetary transactions are reclassified from property tax to grants from foreign governments; (ii) civil service pensions are reclassified from interest to compensation of employees; (iii) grants in the capital budget are reclassified as capital grants under expense; and (iv) payment of interest on behalf of MPs is classified as compensation of employees. — 2019Q1
- H: Start to adjust transactions in nonfinancial assets with the change in the stock positions of accounts of government projects at the Central Bank of Lesotho (CBL) funded with external capital grants and/or loans. — 2019Q1
- H: Obtain information on the types of activities subject to withholding tax and allocate the taxes to the relevant categories. As an interim measure, total withholding taxes should be allocated using proportions provided by the LRA. — 2019Q1
- H: Start collecting data on government equity participation/withdrawal in/from public and private corporations. — 2019Q1
- H: Start collecting data on actual capital grants revenue and recording associated expenditure on transactions in nonfinancial assets. — 2019Q1
- M: Start collecting data on other economic flows (holding gains/losses – revaluation, and volume change) on government deposits. — 2019Q2
- M: Start compiling functional expenditure (COFOG) classified according to the GFSM 2014 guidelines. — 2019Q3
- H: Implement GFS TA recommendations made for required changes on the economic and functional classifications of the COA for consistency with guidelines of the GFSM 2014. — 2019Q1
- M: Introduce the new chart of accounts in financial reporting of local governments (district councils and Maseru City Council). — 2019Q3
- M: Introduce the new chart of accounts in financial reporting of extrabudgetary units (parastatals and agencies). — 2019Q3

### Outcome: Data are compiled using the sectorization of the latest manual/guide
- H: Review, then finalize, adopt and disseminate the institutional table of the public sector and use it consistently across all macroeconomic statistics (GFS, National Accounts, Monetary and Financial Statistics, External Sector Statistics). — 2019Q1
- H: Review and update the institutional table on a regular basis to incorporate new entities and/or remove defunct ones. — Annually

### Outcome: Data are compiled and disseminated using the appropriate basis of recording consistent with the latest manual/guide
- H: Move towards recording transactions on a modified accrual basis and start recording expenditure transactions on “commitment” basis. — 2019Q1
- H: Start recording transactions below the line on accounts payable as the difference between commitment and payment transactions in IFMIS. — 2019Q1
- H: Start to regularly reconcile revenue data from bank accounts and revenue data from LRA. — 2019Q1

### Outcome: Data are compiled using appropriate statistical techniques, including to deal with data sources, and/or assessment and validation of intermediate data and statistical outputs
- M: Start documenting GFS compilation procedures. — 2019Q2

### Outcome: Improved timeliness of data made available internally and/or to the public (shorter delays)
- H: Resume timely dissemination of monthly GFS to the National Summary Data Page (NSDP). — 2019Q1
- H: Resume timely dissemination of annual GFS for the GFS Yearbook (GFSY). — 2019Q1
- M: Disseminate quarterly central government debt on a timely basis to the World Bank QPSDS database. — 2019Q1

### Outcome: Internal consistency within a macroeconomic or financial dataset has improved (reduced discrepancies)
- H: Reduce the statistical discrepancy to less than 1 percent of GDP. — 2019Q2
- H: Ensure proper data management to maintain consistency between the “MF_SGO_DB” and “MF_MTFF_DB” files; i.e., ensure that updates to either file is reflected into the other file whenever there is an update. — 2019Q1
- M: To the extent possible, the MOF, the CBL, and the BOS should share the same databases and data sources to guarantee consistency among distinct macroeconomic statistical systems, optimize the use of resources, and avoid duplication of efforts. — 2019Q1

### Outcome: Longer time series have been compiled and/or made available internally and/or to the public
- L: Update historical series for the budgetary central government consistent with the GFSM 2014 guidelines. — 2019Q1

### B. Officials Met During the Mission
- Mr. Moeketsi Majoro — Ministry of Finance — Minister
- Ms. Motena Tšolo — Ministry of Finance — Principal Secretary
- Mr. Khalane Malie — Ministry of Finance — Macroeconomic Policy & Management
- Mr. Moeketsi Ntoi — Ministry of Finance — Macroeconomic Policy & Management
- Mr. Molefi — Ministry of Finance — Macroeconomic Policy & Management
- Mr. Motseki Khiba — Ministry of Finance — Macroeconomic Policy & Management
- Mr. Toka Sello — Central Bank of Lesotho — Research
- Ms. Kamohelo Phenthi — Ministry of Finance — Budget
- Ms. Keletso Matšela — Ministry of Finance — Public Debt
- Ms. Libako Leisanyane — Ministry of Finance — Macroeconomic Policy & Management
- Ms. Mafatima Moshoeshoe — Ministry of Finance — Macroeconomic Policy & Management
- Ms. Mamosi Senekane — Ministry of Finance — Macroeconomic Policy & Management
- Ms. Maphantsi Sekhesa — Ministry of Finance — IFMIS
- Ms. Mapoloko Seitlheko — Ministry of Finance — Public Debt
- Ms. Neo Tau — Ministry of Finance — Macroeconomic Policy & Management
- Ms. Nthabiseng Sello — Ministry of Finance — Macroeconomic Policy & Management
- Ms. Senate Mokobocho — Ministry of Finance — Macroeconomic Policy & Management
- Ms. Thabo Moerane — Ministry of Finance — Treasury
- Ms. Nnete Hanyane Ramone — PODCPF — Finance
- Ms. Malefu Majoro — PODCPF — Finance

*Source: 1lsoea2019002 - 28. Upon request from the Principle Secretary, Ministry of Finance, the mission assisted*

### Appendix I. Outstanding Issues/Recommendations from March and N

### Appendix I. Outstanding Issues/Recommendations from March and November 2016 TA Reports on GFS Missions to Lesotho (status as of January 2019)

### Institutional table and Chart of Accounts (COA)
- Recommendation 2: Review and finalize the institutional table prepared during the mission and adopt the final table as a standard for the production of consistent macroeconomic statistics in Lesotho. — Status: Partly done. "The list was discussed by staff from the MoF, CBL, and BOS and is yet to be finalized."
- Recommendation 3: Establish a working group (Accountant General’s Office, the Treasury, the Budget Department and the MOF’s Macroeconomic Policy and Management Department, the CBL’s Research Department, the BOS, and the Ministry of Local Government) to regularly review and update the institutional table. — Status: Partly done. "See recommendation #2."
- Recommendation 4: Develop and implement procedures for maintaining and reviewing regularly the public sector institutional table. — Status: Partly done. "Agreement reached on ways to update the institutional table but has not yet been documented."
- Recommendation 8 / 9 / 31 / 35 / 36: Revise COA; ensure involvement of MOF, CBL, BOS, local government; obtain TA review of COA; review Lesotho’s COA classifications with GFSM 2014. — Statuses: Done (9); Done (35); Ongoing (31); Partly done or Not done for others. Specifics:
  - Recommendation 9: "Done. The TA mission reviewed the COA and made recommendations."
  - Recommendation 35: "Done."
  - Recommendation 31: "Ongoing. Work is ongoing – there are weekly meetings (on Wednesday) on the development of the chart of accounts."
  - Recommendation 36: "Not done. No progress has been made in having the GFS compilers needs for fiscal reporting purposes incorporated in the design of the CoA."

### GFSM 2014 migration, GFS compilation and staffing
- Recommendation 5: Establish in the MOF’s Macroeconomic Policy and Management Department a group of officials dedicated to GFS compilation efforts, in line with the intended migration plan to implement GFSM 2014. — Status: Done. "A team has been set up to compile GFS."
- Recommendation 28: Coordinate the GFSM 2014 Migration Plan with the national implementation of IPSASs. — Status: Not done. "Work is needed to coordinate the activities of the macro department and the treasury departments on their respective plans to migrate to the GFSM 2014 and IPSAS."
- Recommendation 11 (Appendix II): "Use the template created during the mission to compile GFS for district councils for previous years and start compiling GFS for district councils regularly." — Status: Not done.
- Recommendation 30: "To the extent possible, the MOF, the CBL, and the BOS should share the same databases and data sources..." — Status: Partly done. "MoF and CBL have started meeting since September 2018 to ensure consistency in their databases. Coordination with BOS has yet to start."

### IFMIS, bridge tables, and data consistency
- Recommendation 21: Assure the compliance of IFMIS data so that all reports produced from these source guarantee consistencies in the data reported. — Status: Not done. "Treasury has started to produce monthly cut-offs starting in October 2018, but there has been no checking to see if the data is consistent."
- Recommendation 22: Review the bridge tables within IFMIS to guarantee that all data available be compiled to GFSM 2014 formats and classifications and establish a procedure for continuous updating. — Status: Not done. "Bridge table needs to be reviewed and finalized and incorporated into the IFMIS to allow data download."
- Appendix II Recommendation 11: "Ensure proper data management to maintain consistency between the “MF_SGO_DB” and “MF_MTFF_DB” files..." — Status: Done. "There were new working files developed ensuring consistency between the SGO and the MTFF."
- Appendix II Recommendation 15: "Introduce all local governments financial data in the new IFMIS." — Status: Not done. "The new IFMIS will go live on April 1, 2019 but no assurance as to whether local governments will be included in EPICOR."

### Data coverage, submissions, and dissemination (GFSY, IFS, GFHF, NSDP, PSDS)
- Recommendation 6 / 34: Gradually increase coverage of central government data to cover all entities on the revised institutional table and subsequently the public sector. — Status: Not done. "No attempt has yet been made on broadening the coverage of GFS." / "No data are currently collected and compiled for entities beyond the narrow budgetary central government."
- Recommendation 7: As soon as a time series is produced for BCG, submit historical IFS and GFSY data to STA for dissemination. — Status: Not done. "Revised annual and high frequency GFS have not been submitted to the GFSY and GFHF."
- Recommendation 12: MOF should collect BCG monthly data so that regular IFS questionnaires can be submitted to the IMF. — Status: Partly done. "Data is being collected monthly and posted on the NSDP but not reported for the IFS."
- Recommendation 10: MOF to regularly update and submit the detailed GFSM 2014-compliant GFSY questionnaire produced by the mission. — Status: Not done. "Data submitted and included in the GFSY2017, updated data for FY18 and revised series prior to that has not been submitted to the GFSY."
- Recommendation 26 / Appendix II Recommendation 20: "Review and disseminate data for the World Bank-IMF PSDS database quarterly from 2009–16." and "Start disseminating debt statistics on a quarterly basis to the World Bank PSDS database." — Status: Not done. "No data were disseminated."
- Appendix II Recommendation 21: "Refine the reclassification in the BCG statement of operations and disseminate the annual and monthly series to STA and the National Summary Data Page (NSDP) respectively." — Status: Not done. "SGO yet to be completed for starting data dissemination."

### Classification, reclassification and recording of specific items
- Recommendation 14: "Revenue entitled 'diamond royalties' should be classified as tax on exports and the same treatment should be applied on SNA." — Status: Done. "Reclassifications done, but are yet to be effected in the working files used for data sharing with AFR."
- Recommendation 13: Obtain information on activities subject to withholding tax and allocate the taxes to relevant categories; interim allocation using proportions provided by the LRA. — Status: Not done. "LRA is still experiencing challenges in disaggregating WHT data."
- Recommendation 15: Disaggregate data on SACU receipts and allocate them to relevant categories consistent with other SACU member countries. — Status: Not done.
- Recommendation 20: Review interest revenues and expenses to correctly record transactions involving interest payments on behalf of parastatals and equivalent revenues so that flows can be treated according to GFSM 2014 guidelines. — Status: Not done.
- Recommendation 42: Reroute interest payments on behalf of parliamentarians so that they are shown as part of their compensation of employees. — Status: Not done. "Changes have yet to be made to the current working files. The draft SGO produced during the previous TA mission had already made the reclassification."

### Public sector entities, parastatals, revolving funds, scholarships, local government
- Recommendation 16: Compile comprehensive data for GFS by adding information not in IFMIS using public finance investment database and CS-DRMS. — Status: Not done. "The Public Finance Investment Database has been down and not accessible."
- Recommendation 17: Allocate revenue and expenditure funded by transfers from bilateral donors paid directly to line ministries or contractors to the specific revenue, expense, and net acquisition of nonfinancial assets categories. — Status: Partly done. "Work is in progress."
- Recommendation 18 / 40: Investigate nature of line items related to the revolving fund and scholarships; collect all data and classify according to GFSM 2014. — Status: Not done. "Data on transactions in the revolving fund (repaid scholarships)—information from National Manpower Development Services is not captured in the SGO." / "There is still a need to correct recording to distinguish expense from acquisition of financial assets..."
- Recommendation 19: Investigate whether the loan for Maseru Waste Water Project was assumed as debt of central government or remains as debt of public nonfinancial corporations and classify appropriately. — Status: Not done. "Debt assumption is not currently included in the SGO."
- Recommendation 23: Obtain additional details on PPP contracts and record data according to GFSM 2014 and SNA 2008. — Status: Not done. "No data available yet, expectations are there to have access on the contracts..."
- Appendix II Recommendations 4, 12, 13, 14: Collect transactions for parastatals and agencies classified as BCG entities; compile GFS for district councils and Maseru City Council; introduce new CoA and local government CoA in reporting. — Statuses: Not done / Partly done. "Financial statements for MCC were collected, but no GFS were compiled." "The CoA has not yet been finalized."

### Public debt data, guarantees, arrears, and balance sheets
- Recommendation 11 (Appendix I): Expand annual data submissions on BCG assets and liabilities to produce a partial balance sheet. — Status: Not done. "No data has been compiled yet for the financial balance sheet even though data is available for the compilation a financial balance sheet for the BCG."
- Recommendation 25: Source data for "other accounts payable", "guarantees" and "pensions" to organize into a dataset to improve public sector debt compilation and dissemination. — Status: Partly done. "Only data on guaranteed debt is currently compiled, no data is compiled on other accounts payable and pensions."
- Recommendation 27: Develop procedures and mechanisms for the collection of public debt data from public nonfinancial corporations. — Status: Partly done. "The debt department has data on external debt, but no data on domestic debt. Work is ongoing on mechanisms for sourcing information."
- Recommendation 41: Gather detailed data on arrears to classify them into corresponding items of expense and gradually adopt the accrual recording of these items. — Status: Not done. "Recording in the SGO is still done on a cash basis, omitting inclusion of accounts payable (arrears)."

### Statistical discrepancies, targets and outstanding implementation
- Appendix II Recommendation 10: "Reduce the statistical discrepancy to less than 1 percent of GDP." — Status: Not done. "All recommendations meant to reduce the statistical discrepancy were not implemented."
- Multiple recommendations remain Not done or Partly done across data submission, reclassification, reconciliation, and local government coverage. Specific implementation actions often started (e.g., meetings since September 2018; monthly cut-offs from October 2018) but full adoption or documentation remains outstanding.

*Source: Appendix I. Outstanding Issues/Recommendations from March and November 2016 TA Reports on GFS Missions to Lesotho; Appendix II. Outstanding Issues/Recommendations from April 2018 TA Report on GFS Mission to Lesotho (status as of January 2019).*

### Appendix III. Summary of Implementation of Past GFS TA

### Appendix III. Summary of Implementation of Past GFS TA

### Implementation of Past GFS TA missions and recommendations
- 2016 TA Missions: Done 6; Partly Done 9; Ongoing 2; Not done 26; Total 43
- 2018 TA Mission: Done 2; Partly Done 5; Ongoing 0; Not done 14; Total 21
- All 1,2: 8 (12.5%) 14 (21.9%) 2 (3.1%) 40 62.5%) 64
- Footnotes:
  - 1 24 recommendations in the 2016 TA missions overlapped.
  - 2 6 recommendations in the 2018 TA mission overlapped with those from the 2016 TA mission

*KINGDOM OF LESOTHO — INTERNATIONAL MONETARY FUND*

### Key observations from the implementation summary
- A substantial share of recommendations remained "Not done" in both 2016 and 2018 missions (26 of 43 in 2016; 14 of 21 in 2018).
- Overlapping recommendations between missions: 24 overlaps in 2016 missions; 6 overlaps between 2018 and 2016 missions.
- Aggregate summary line presents overall counts and proportions for all missions combined as reported above.

---

### Appendix IV. Compilation of GFS from Financial Statements

### Purpose and scope
- Main source data for budgetary central government: accounting records or budget execution data.
- For extrabudgetary units/entities, social security funds, public corporations, and local governments, main source data are likely to be financial statements.
- This appendix provides summary guidelines for the compilation of GFS from financial statements.
- Extracted from the Government Finance Statistics: Compilation Guide for Developing Countries (IMF, 2011).

### Source financial statements and required adjustments
- Use the income statement, balance sheet, and cash flow statement as source documents.
- These statements usually follow private sector accounting rules and a noncash basis of recording; they must be adjusted to conform to GFSM 2014.
- The process generally involves preparing bridge tables and derivation tables and using them to convert the national presentation to the GFSM 2014 presentation.

### Steps to compile GFS from financial statements
- (a) prepare bridge tables for the income statement, balance sheet, and cash flow statement;
- (b) calculate the changes between the closing and opening balance sheet values for each category of assets and liabilities;
- (c) prepare derivation tables for the major GFS aggregates;
- (d) compile GFSM 2014 detail tables and summary statements;
- (e) verify the accuracy of the process.

### Preparing bridge tables and classifying items
- Classify all items in the financial statements according to GFSM 2014 classifications.
- Identify and exclude all flows that are not transactions (other economic flows) from revenue, expense, and transactions in assets and liabilities.
- Other economic flows include price changes (revaluations) and other changes in the volume of assets and liabilities—examples in income statements: gains/losses from sales of assets, foreign exchange rate gains/losses, impairment of assets/losses, revaluations, provisions, and allowances.

### Deriving transactions in assets and liabilities
- Transactions in assets and liabilities for a period are generally obtained from changes in balance sheet (stock) values.
- Calculate differences between closing and opening balance sheet values and adjust to remove other economic flows.
- For many assets, stock of assets should be calculated as: balance sheet value of the asset minus accumulated depreciation, minus depreciation for the current accounting period.
- For other assets, calculate as: balance sheet value of the asset minus allowances for impairment or doubtful accounts.

### Prior adjustments and common reclassifications
- Financial statements frequently include under revenue and expense items that GFSM 2014 classifies elsewhere; common examples:
  - disposals and acquisitions of nonfinancial assets → GFSM 2014: transactions in nonfinancial assets;
  - loan disbursements and repayments → GFSM 2014: transactions in financial assets;
  - profits and losses in the sale of assets → GFSM 2014: other economic flows.
- Once derivation and bridge tables are prepared they can be used to compile GFS for subsectors (extrabudgetary units, local governments) and sectors (general government).

### Verification checks to ensure accuracy
- Major GFS aggregates should correspond to values calculated in derivation tables; iteration between bridge tables, derivation tables, and detail tables/summary statements is normally required.
- Net lending/borrowing should be the same whether calculated as:
  - revenue minus expense minus transactions in nonfinancial assets; or
  - net acquisitions of financial assets minus net incurrence of liabilities.
  - Practical differences should be recorded as a statistical discrepancy in a separate line.
- Closing balance sheet category values should equal opening value plus transactions and other economic flows during the period.
- Net change in the financial asset "Currency and deposits" in the Statement of Government Operations should equal the net change in the stock of cash in the Statement of Sources and Uses of Cash (and the institution’s cash flow statement).

### Specific treatment of provisions and depreciation
- Provisions:
  - Not an item in the GFS system (not considered liabilities), but a setting aside of funds for a specific purpose.
  - Flow is recorded only when the actual loss is incurred.
  - Recommended rule of thumb: treat provisions as a proxy for a loss (treat as another change in the volume of assets).
- Depreciation:
  - Not an item in the GFS system; GFS uses consumption of fixed capital instead.
  - Recommended rule of thumb: treat depreciation as a proxy for consumption of fixed capital (treat as an expense).
  - Compilers should first try to obtain consumption of fixed capital figures from national accounts. Only if not available should depreciation be used as a proxy.
  - Depreciation is likely a good proxy if assets are valued at fair market prices, but a poor proxy if assets are valued at historical costs.

### Cautions and common pitfalls
- Getting signs right is challenging and critical; financial statements may present items with signs that differ from GFSM treatment:
  - Example: an item under revenue with a negative sign may be treated as an expense in GFS and must be moved to expense with a positive sign.
  - Holding gains and losses can appear with different signs depending on presentation.
  - Financing items: GFSM 1986 shows financing with a sign opposite the overall deficit/surplus; GFSM 2014 shows financing with the same sign as the cash surplus/deficit.
- Close attention must be paid to how each item affects aggregates or balancing items to avoid discrepancies.

*KINGDOM OF LESOTHO — INTERNATIONAL MONETARY FUND*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1lsoea2019002.pdf_