Kingdom of Lesotho: Selected Issues
IMF Staff Country Reports, March 5, 2018
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- Kingdom of Lesotho: Selected Issues
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Bibliographic details
- Published: March 5, 2018
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781484344941.002
Overview
- Provides further background on the macrofinancial sector analysis that informed Lesotho’s 2017 Article IV consultation.
- Focuses on potential consequences for the financial system of a severe Southern African Customs Union (SACU) revenue shock.
- Emphasizes interaction of fiscal position, balance of payments, and financial sector vulnerabilities.
Financial system characteristics
- Financial sector described as small, concentrated, and lacking financial inclusion.
- Mobile banking services and financial cooperatives offer some encouraging potential.
- Financial shallowness and lack of inclusion may be a defining feature of the formal banking system, raising questions about trade-offs between inclusiveness and financial stability.
Key vulnerabilities and transmission channels
- Most important vulnerabilities: exposure to developments in South Africa and dependence on SACU revenues.
- Shocks to SACU revenues can become a source of systemic risk by:
- Affecting the fiscal position.
- Affecting the balance of payments.
- The financial system will be affected by both channels, with substantial implications if the shock is permanent.
Scenarios analyzed
- Decline in reserves that may threaten the sustainability of the hard currency peg with the South African rand.
- Impact of a forced fiscal consolidation on:
- Household income.
- Quality of credit to households, affecting both bank and nonbank lenders.
Policy implications and considerations
- Need to assess stability of the hard currency peg under reserve pressure from SACU revenue shocks.
- Consider trade-offs between expanding financial inclusion and maintaining financial stability given financial system shallowness.
- Monitor household credit quality and nonbank lenders' exposures in the event of fiscal consolidation.
Publication and metadata
- Pages: 13
- Volume: 2018
- DOI: https://doi.org/10.5089/9781484344941.002
- Issue: 059
- Series: Country Report No. 2018/059
- Stock No: 1LSOEA2018002
- ISBN: 9781484344941
- ISSN: 1934-7685
Subject and keywords
- Subject: Bank credit, Banking, Commercial banks, Credit, Financial inclusion, Financial institutions, Financial markets, Loans, Mobile banking, Money, Technology
- Keywords: Africa, bank, bank NFA coverage, CBL stress testing, Commercial banks, coverage ratio, CR, Credit, Financial inclusion, ISCR, Lesotho, loan, Loans, Mobile banking, NFA holding, portfolio choice, Southern Africa
International Monetary Fund. "Kingdom of Lesotho: Selected Issues", IMF Staff Country Reports 2018, 059 (2018).
Content in this bundle
- Country Report