EU warns Lesotho on aid

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Billy Ntaote

THE European Union (EU) has warned Lesotho risked forfeiting more development partner support due to the “slow progress” in the implementation of public finance and governance reforms.

The 28-country bloc has also expressed concern over the Amnesty Bill, 2016 meant to grant members of the security sector a blanket amnesty for offences committed between January 2007 and December 2015, saying it promoted impunity which would stymie donor support.

The warning comes after the United States government said Lesotho’s risked losing eligibility for free trade benefits under the African Growth and Opportunity Act (AGOA) facility for 2017 for failing to meet rule of law and governance benchmarks.

AGOA accords duty-free treatment to products exported by beneficiary sub-Saharan countries to the United States including Lesotho.

Addressing a media briefing in Maseru this week, EU Ambassador to Lesotho Dr Michael Doyle said donor support to Lesotho had been waning over the years due to successive governments’ preoccupation with political issues at the expense of the developmental agenda.

Citing the EU’s decision in March this year not to disburse €26.85 million (about M460.65 million) meant to support Lesotho’s national budget, Dr Doyle said insufficient progress was being made in the implementation of the agreed policy reforms.

He said the decision was taken after an assessment of Lesotho’s compliance with the agreed policy reforms especially in the area of Public Financial Management. The financing entailed general and targeted sectoral budgetary support.

“The eligibility criteria is based on satisfactory progress with the implementation of the National Strategic Development Plan (NSDP), the programme to improve Public Financial Management, transparency and oversight of the state budget, as well as the maintenance of a stability-oriented macroeconomic policy,” said Dr Doyle, adding the problems had evolved during the tenure of successive governments.

The EU, he said, had in early 2015 requested government to submit additional supporting documents “to demonstrate substantive progress” on eligibility for budget support for the period 2014 – 2015.

“An initial analysis had concluded with a negative assessment concerning the eligibility conditions. In order to give the government an opportunity to act, an additional five months were granted to demonstrate real progress in the implementation of reforms,” the envoy explained.

After an evaluation of the documents submitted by the government, the EU concluded that the eligibility conditions for budget support had not been complied with due to the “insufficient progress” made in the implementation of reforms.

Dr Doyle indicated that while a strategy was in place to implement the formal financing agreement with the EU, it was not undertaken forcing the bloc to cancel the payment.

“Cutting the budget support was the most difficult message I had to communicate since I came to Lesotho. There is an agreement by the two partners whose conditions should be met. Otherwise, there are implications. There really was no choice on our part,” he said.

The EU ambassador said while NSDP was in place, the implementation of the strategy had not been proceeding at an adequate level.

“Poverty levels thus remain at an unacceptably high level at around 55 percent and inequality is rising, as evidenced by the latest United Nations Human Development index report published about two weeks ago,” he said.

“Only just one exception is the water sector where we had intended to provide water sector budget support. There, we felt that the water policy implementation was in better shape than the overall implementation of the NSDP.”

On the macro-economic front, the bloc took note of Lesotho’s lack of belt tightening in response to dwindling revenues such as the Southern African Customs Union (SACU).

Lesotho’s share of SACU revenue has been steadily declining over the preceding years due to a slowdown in the performance of the global economy. The 2016/2017 SACU revenue share is estimated to account for 32 percent of Lesotho’s budget – down from 42 percent in 2014/15.

“On the macro-economic budget performance, the EU had growing concerns on the lack of responses to reduced funding that is available in the national budget. You all know about the reduced SACU revenues as well as the reduced donor inflows into the country and that requires a response in terms of budgetary adjustments,” said Dr Doyle.

“We didn’t see those adjustments being made to match the expenditure with income. Related to that, another concern we had is that money for the recurrent expenditure has been taken from funding that had been set aside for capital expenditure.

“And for the country to grow, it is crucial for those investments in infrastructure and in the people to proceed. So those issues were an important factor in that decision.”

Another shortcoming the union noted was in the balancing of books at the end of each month. He said the EU had funded a Public Expenditure and Financial Accountability Assessment of the government to provide a benchmark for where Lesotho stands.

On budget transparency, Dr Doyle acknowledged some good government practices such as a citizens’ budget.

“However in general, transparency and accountability was low. One example to illustrate this is the regular auditor-general’s reports which are tabled in parliament and discussed in the Public Accounts Committee.

“Unfortunately, findings seem to be rarely followed up. For example the auditor-general’s report for 2013-14 said: ‘The opening cash balance of M5.867 billion on 1 April 2013 was different from the closing cash balance of M18.214 billion as of 31 March 2013. So you can’t have different opening and closing balances. Reconciling adjustments were not provided to validate the difference.’”

Dr Doyle said this assessment was one of the reasons the auditor-general gave the budget a thumbs down for four times in a row.

He said the government had committed to developing a roadmap for developing a Public Finance Management Reforms to be eligible in future for donor funds through budget support. In turn, the EU had been providing technical assistance since last year.

“Of course it is not just for donor funds only but for citizens and the country and that’s why these public financial reforms are necessary.

“Quite a bit of work has been done on establishing processes and so on, but still a lot more will need to be done over the coming years,” the envoy said, adding the EU had resorted to funding individual projects.

Dr Doyle said the ball was in Lesotho’s court to become eligible for the EU’s budgetary support given that it is the last development partner to provide the facility after the World Bank and African Development Bank already withdrew.

“It is all in the hands of Basotho and the government. We will try to support as much as we can and welcome the initiatives that are being taken,” he said.

“There has been no shortage of recommendations for reforms.  Recommendations for Lesotho were prepared in 2014 by the Commonwealth, then you had the SOMILES (SADC Observer Mission in Lesotho) recommendations and SADC facilitator to Lesotho Cyril Ramaphosa’s recommendations. Subsequently Lesotho had the SADC commission of inquiry’s recommendations but, unfortunately, we have seen very little concrete implementation.”

Dr Doyle added: “Unfortunately, with the budget support, it is the concrete implementation of the reforms and taking other actions that will take the country forward and give confidence to the donors.”

He further noted that pride of place had been given to politics at the expense of developmental issues.

“I think the problem over the last couple of years has been that the attention has been on the political problems in the country. It’s very hard to focus on the developmental agenda when you have other urgent political issues that are taking up your time.

“We have been providing support but progress has not been made. And that presents a problem for us to convince our headquarters and our member states on maintaining the budget support.”

The EU’s Head of Cooperation, Theodorus Kaspers, chipped in saying Basotho should bear in mind that the EU was accountable to the bloc’s taxpayers and there should be concreate evidence of the impact made by the provision of financial assistance.

“We have to show that there is progress made towards poverty alleviation. If no progress is being achieved, then we have to take drastic decisions,” he said.

“You may see them as harsh but you should also understand we have a constituency in Europe which we have to satisfy and that is the European taxpayers.”

Dr Doyle said the bloc also took into consideration governance and rule of law issues in assessing Lesotho’s eligibility for donor support.

He said the Amnesty Bill, 2016 would foster impunity since people facing serious criminal charges would not face justice.

In its current form, the bill would see members of the Lesotho Defence Force, Lesotho Mounted Police Service, National Security Service, Lesotho Correctional Service, and government officials being granted amnesty. It would extend to members of the LDF whom the SADC Commission of Inquiry had recommended should face prosecution.

“The EU is very concerned about the Amnesty Bill, 2016 because it is a blanket amnesty. It goes against the SADC Commission of Inquiry’s recommendation for the suspension of people implicated in cases of murder, attempted murder and treason while investigations into the allegations proceeded,” Dr Doyle said.

“Under this proposed law, there is no acknowledgment of wrongdoing by the perpetrators to the victims. In any case, amnesties have been instituted in Lesotho before but there have not stopped the commission of human rights abuses nor brought about reconciliation.”

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