Press Release: IMF’s Executive Board Completes the Sixth Review Under the ECF Arrangement for the Kingdom of Lesotho, and Approves US$8.6 Million Disbursement

September 9, 2013

Press Release No. 13/334
September 9, 2013

The Executive Board of the International Monetary Fund (IMF) completed the sixth and final review of the Kingdom of Lesotho’s performance under the program supported by the Extended Credit Facility (ECF) arrangement. Completion of the review will allow for the disbursement of an amount equivalent to SDR 5.68 million (about US$8.6 million), bringing disbursements under the arrangement to an amount equivalent to SDR 50.605 million (about US$76.6 million). The authorities have expressed interest in a successor arrangement, which would expedite achieving the medium-term reserve target, help address structural weaknesses, and catalyze support from its international partners.

The Kingdom of Lesotho’s three-year ECF arrangement was approved on June 2, 2010 (See Press Release No. 10/224) with total access equivalent to SDR 41.88 million (about US$63.4 million). To cushion the impact of the 2010‒11 flood damage and high international commodity prices, the Executive Board approved an augmentation of access of 25 percent of quota in April 2012, bringing total access to SDR 50.605 million (about US$76.6 million), under the ECF arrangement (See Press Release No. 12/126).

At the conclusion of the Executive Board’s discussions, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, made the following statement:

“Lesotho’s macroeconomic policies, supported by the ECF arrangement, have served to ensure macroeconomic stability and secure robust growth. Despite a series of adverse shocks, including the fall in Southern African Customs Union (SACU) revenues in 2010–11 and weather-related shocks in 2011 and 2012, fiscal and external sustainability have been maintained. Economic growth has been robust for the last three years; inflation has subsided, reflecting moderation in international commodity prices.

“The authorities remain committed to prudent fiscal policies. With fiscal adjustment efforts and the recovery of SACU revenues, in 2012/13, a fiscal surplus was recorded for the first time since 2008/09. In light of the downside risks associated with the global and regional economic outlook, it will be important to maintain prudent fiscal policies by containing recurrent spending and improving revenue administration. Such a policy stance will help Lesotho achieve reserve coverage of five months of imports, its medium-term target for international reserves.

“To support the implementation of prudent fiscal policies, further progress in public financial management and civil service reforms is needed. The establishment of the Cash Management Unit and the monthly reconciliation of all treasury accounts will help improve expenditure control and the monitoring of revenue collection.

“The authorities have made progress in improving the business climate and promoting private sector-led growth, with developing the national identification card system. The Central Bank of Lesotho continues to improve the regulatory frameworks for banks and nonbank financial institutions to promote financial sector developments with proper supervisory oversight.

“The authorities’ strong policy efforts, supported by the ECF arrangement, have helped attain macroeconomic stability and strong growth. Given the economic challenges that Lesotho still faces, continued engagement with the Fund should further support the authorities’ efforts, building on the progress under the current arrangement,” Mr. Shinohara stated.

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