Washington, DC:
A team from the International Monetary Fund (IMF), led by Mr. Aqib Aslam,
conducted a series of virtual missions, most recently from September 7 to
October 15, 2021, to discuss the authorities’ economic and financial
program and their request for IMF financial support.
The authorities and the mission team had productive discussions on policies
that could be supported by the IMF under a financial arrangement. The
program under discussion would aim to support a durable post-pandemic
recovery, restore fiscal sustainability, strengthen public financial
management, and ensure the protection of the most vulnerable. Other key
structural reforms to be implemented include strengthening governance and
fostering private sector investment to spur inclusive growth and employment
over the medium term.
At the end of the visit, Mr. Aslam issued the following statement:
“Lesotho has been experiencing twin economic shocks resulting from the
pandemic and a decline in revenues from the Southern African Customs Union
(SACU) that have proved to be highly volatile. Public expenditures have
been increasing while SACU revenues were buoyant but have not adapted to
their decline and the limited growth in other revenue sources. At the same
time, the economy has been in recession since 2017. The resulting fiscal
and external imbalances, if left unaddressed, would continue to put
pressure on international reserves and lead to government payment arrears.
“Discussions emphasized the need to support a robust and inclusive
post-pandemic recovery. To this end, the mission discussed with the
authorities a number of options for containing the fiscal deficit to a
level that is sustainable and can be fully financed. The team noted that
the adjustment should be focused on expenditure measures while boosting
poverty-reducing social spending to protect the most vulnerable.
Complementary actions include efforts to broaden financial access and
inclusion; strengthen financial supervision; modernize the legal frameworks
for bank lending, business rescue, and restructuring, and digitalize
payment systems.
“On the fiscal front, efforts should focus on addressing the public sector
wage bill, which is one of the largest in the world compared to the size of
the economy; saving on public sector and official allowances; better
targeting education loans; streamlining the capital budget and initiating
gender-responsive budgeting. Discussions also considered measures to
modernize tax policy and improve domestic revenue mobilization. The mission
noted the need to address long-standing PFM issues to ensure the provision
of reliable fiscal data, the integrity of government systems, and the sound
use of public resources.
“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 would be proposed for the IMF Executive Board's consideration.
“The IMF team thanks the authorities for their hospitality and constructive
discussions.”
The IMF mission met with Prime Minister Majoro, Minister of Finance
Sophonea, Central Bank Governor Matlanyane, and other senior government
officials. The team also met with representatives of the diplomatic
community, private sector, civil society, and multilateral development
partners.
