An International Monetary Fund (IMF) mission, led by Mr. Joseph Thornton,
visited Maseru from August 23 to September 5, 2018 to discuss the
authorities’ economic and financial program and possible financial support
by the IMF.
The authorities and the mission had productive discussions on policies
that could be supported by the IMF under a financial arrangement. The
program would aim to support growth and employment, and buttress reserves
by restoring fiscal sustainability and strengthening public financial
management, while ensuring the protection of the most vulnerable.
Mr. Thornton made the following statement at the end of the visit:
“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.
“The mission discussed with the authorities a number of options for
containing the deficit to a level that can be fully financed. The mission
noted that the adjustment should be focused on expenditure measures,
including efforts to address the public sector wage bill, which is one of
the largest in the world compared to the size of the economy, while making
efforts to ensure that the most vulnerable are protected. The mission also
discussed other possible areas for savings, including on government travel,
foreign embassies, and procurement. Discussions also considered measures to
modernize tax policy and improve the revenue system. The mission noted the
need to address long-standing PFM issues to ensure the provision of
reliable fiscal data and ensure sound use of public resources.
“The mission noted the need to accelerate structural reforms to support
growth and enhance job creation. It 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.”
The IMF team met with Finance Minister Majoro, Minister of the Public
Service Molapo, Governor of the Central Bank Matlanyane and other senior
officials. The team also met with representatives of the diplomatic
community, private sector, civil society, and multilateral development
partners. The team thanks the authorities for their hospitality and
constructive discussions.
