Statement at the Conclusion of an IMF Mission to LesothoPress Release No. 13/225
June 21, 2013
An International Monetary Fund (IMF) mission led by Mr. Jiro Honda visited Maseru June 11–24, 2013, to conduct the sixth review under the program supported by the Extended Credit Facility (ECF). The mission met with Finance Minister Leketekete Ketso, Minister of Energy, Meteorology and Water Affairs Timothy Thahane, Central Bank of Lesotho (CBL) Governor Rets'elisitsoe Matlanyane, other senior government officials, as well as representatives of the private sector and development partners. The mission would also like to express its gratitude to the authorities and the staff of the Ministry of Finance and the Central Bank of Lesotho for the highly professional, productive, and open discussions.
Mr. Honda issued the following statement:
“Lesotho’s three-year ECF arrangement will come to an end in September (see Press Release No. 13/164). In these three years, the Lesotho economy has made significant progress in restoring stability while sustaining robust growth. At the outset of the arrangement in 2010, Lesotho was hit by the fall in Southern African Customs Union (SACU) revenues. There were significant uncertainties about its future prospects, and the fiscal balance was expected to run a deficit through 2014. Now, the fiscal balance has already improved, recording a surplus in 2012/13, with international reserves reaching four months of imports. Furthermore, growth has been robust, with an estimated annual average of 5½ percent over the last three years. This successful outcome has been achieved by the authorities’ significant efforts to restore stability, support from Lesotho’s international partners (including their strong response to the recent drought), and the improvements in SACU revenues.
“Looking ahead, challenges remain, although Lesotho’s economic growth prospects are robust. The key challenge is to achieve sustained growth and reduce poverty, while facing downside risks to growth prospects. These mainly arise from the uncertain global and regional economic outlook, which could lower SACU revenues and external demand for Lesotho’s key export items: diamonds and textiles.
“In this light, we welcome the authorities’ fiscal policies to support macroeconomic stability and enhance growth, while protecting priority growth-promoting infrastructure and spending for poverty reduction. We also welcome ongoing efforts to improve public financial management, enhance tax administration, strengthen financial sector supervision and regulation, and promote private sector development. We support the authorities’ consideration of civil service reform.
“We welcome the authorities’ interest in a successor arrangement with the IMF and look forward to further policy dialogue with the authorities in coming months to help achieve Lesotho’s development goals.
“We expect to finalize the discussions for the completion of the sixth review under the ECF arrangement, with a view to proposing for the IMF Executive Board’s consideration in September 2013. This would allow the final ECF disbursement of SDR 5.68 million (about US$8.6 million). The three-year, SDR41.88 million (about US$63.4 million) ECF arrangement was approved on June 2, 2010 (see Press release No. 10/224), and the Board subsequently approved an augmentation of the program, raising total access to SDR50.61 million (about US$76.6 million—see Press Release No. 12/126).