Press Release No. 11/254

Press Release: Statement at the Conclusion of an IMF Mission to Lesotho

June 27, 2011

An International Monetary Fund (IMF) mission led by Mr. Jiro Honda visited Maseru
June 15-28 to conduct discussions on the second review under the program supported by the Extended Credit Facility (ECF). The mission met with Finance and Development Planning Minister Thahane, Central Bank of Lesotho acting Governor Matlanyane, other senior government officials, as well representatives of the private sector and Lesotho’s development partners. The mission would like to express its gratitude to the authorities and the staff of the Ministry of Finance and Development Planning and the Central Bank of Lesotho for the highly professional, productive, and open discussions.

At the end of the mission, Mr. Honda issued the following statement:

“Lesotho’s economic reform program has worked well and its benefits have now become evident. The fiscal position has adjusted to the sharp fall in revenues from the Southern African Customs Union with a shrinking overall fiscal deficit thanks to strong revenue performance, and strict expenditure control. Structural reform efforts have continued particularly in the financial sector and in public finance management. With these achievements, Lesotho’s growth outlook is improving, despite the shock that it experienced.

“However, Lesotho faces now new policy challenges. The combination of the recent flooding rains and the global food and oil price shocks threatens to take a toll on the economy. Thus, fiscal policy should address the reconstruction needs and protect the poor from higher food prices while preserving progress toward fiscal sustainability and limiting the impact of higher oil prices on the external position.

“The authorities intend to continue their efforts to strengthen bank supervision and financial sector development. The introduction of the new Financial Institutions Act will pave the way for further strengthening of the supervisory and regulatory framework for banks and non-banks and enhancing access to financial services.

“We expect to finalize a Letter of Intent that summarizes the agreement, with a view to allowing the IMF Executive Board to consider the completion of the second review in coming months, allowing the disbursement of SDR 5.68 million (about US$9.1 million).”

The three-year ECF arrangement for SDR 41.88 million (about US$66.9 million) was approved on June 2, 2010 (see Press release No. 10/224).