…As IMF rules out financial bailout until its demands are met
Herbert Moyo/ Bereng Mpaki
THE government and the civil servants are headed for a collision as the former considers implementing a raft of tough International Monetary Fund (IMF) demands for wage cuts and fiscal reforms as part of the conditions for receiving a financial rescue package.
The government and the IMF have been in talks over a financial bailout since June this year to enable Lesotho to reduce the budget deficit and boost its foreign currency reserves.
However, the IMF which was in Lesotho from 23 August to 5 September for talks with Finance Minister Moeketsi Majoro and other government representatives, has ruled out a quick deal.
Instead the Bretton Woods Institution has predicated the granting of a bailout package on the government’s ability to craft and implement prudent policy measures.
“Significant progress was made during the visit and discussions will continue in the coming weeks,” The IMF said in a recent statement.
“If agreement is reached on policy measures…an arrangement to support Lesotho’s economic programme could be proposed for the IMF Executive Board’s consideration.”
The IMF-prescribed policy measures are expected to result in among other things, the reduction of Lesotho’s huge public wage bill, described by the IMF as “one of the largest in the world compared to the size of the economy”.
The IMF has also demanded that the government embarks on cost-cutting initiatives that will enable savings from the reduction on trips by government officials as well as reforms to ensure efficient public finance management.
If implemented, the IMF demands are likely to further strain the government’s relations with restive civil servants who have struck or have given notice to strike to press the government to unconditionally award them salary increments.
Until recently, Finance Minister Majoro had been confident that an agreement would quickly be reached “to put together a package of measures that would ease the current situation while protecting the vulnerable segments of population”.
“Our target to have concluded discussions at the end of August remains,” Dr Majoro said last month, adding, “We do not anticipate any difficulty concluding an arrangement with the IMF and other partners”.
“The type of support we are seeking is called foreign currency reserve support. It differs with project support in that it supports the financing of (foreign currency) reserves build-up as well as the budget and deficit.”
However, Dr Majoro did not disclose how much the government had asked for, saying the size of the bailout package would be determined by both parties during the talks.
But two weeks into September, the negotiations are far from being concluded and it is not clear whether or not a deal will be reached.
Last week Dr Majoro told this publication that the negotiations with the IMF were ongoing and it was premature to say when they would be concluded.
“The interaction with the IMF is continuing and it is premature to respond to any of your questions at this point,” Dr Majoro said.
On its part, the IMF was not forthcoming as to when a deal was likely to be concluded, if at all.
Instead, the multilateral institution said that talks between the government and the IMF would only result in a financial bailout if certain conditions were met by the government.
Chief among these is the need for the government to reduce the high public wage bill, undertake public financial management reform as well as implement the multi-sector reforms that were recommended by the Southern African Development Community (SADC).
In previous engagements, the IMF has also advised the government to award performance-based salary increments.
During its recent visit, the IMF noted that, “Lesotho has been experiencing an economic shock resulting from a decline in revenues from the Southern African Customs Union (SACU)”.
The IMF further observed that government expenditure had “increased rapidly” and had “not been reined in as SACU revenues fell after 2015, despite the lack of growth in other revenues sources”.
“The resulting fiscal and external imbalances, if not addressed promptly, would put pressure on international reserves and result in the build-up of government payment arrears.
“The mission discussed with the authorities a number of options for containing the deficit to a level that can be fully financed.
“The mission noted that the adjustment should be focused on expenditure measures, including efforts to address the public sector wage bill, which is one of the largest in the world compared to the size of the economy, while making efforts to ensure that the most vulnerable are protected.
“The mission also discussed other possible areas for savings, including on government travel, foreign embassies, and procurement. Discussions also considered measures to modernize tax policy and improve the revenue system. The mission noted the need to address long-standing public finance management issues to ensure the provision of reliable fiscal data and ensure sound use of public resources,” the IMF said.
The government-IMF negotiations are being held at a time when the country’s increasingly restive workforce has either struck or threatened to strike to force the government and other employers to award them salary increments that will cushion them against the increases in the prices of goods and services.
Early this year, Dr Majoro announced a four percent salary increase for civil servants but the latter are far from content and some of them are still on strike to force the government to award them another wage increment.
Dr Majoro has however, since indicated that it would not be feasible to award the wage increments due to the poor state of the economy.
The government’s failure to award another round of salary increments have set it on a collision course with teachers who want the government to pay them salary arrears on their performance-based contracts dating back to 2009. They also want the government to pay salaries that are commensurate with their academic and professional qualifications as well as weed out ghost workers from the payroll.
They even want Minister Rapapa to sack the Chief Executive Officer of the Teaching Service Department, ’Maselloane Sehlabi, who they accuse of maladministration and being a stumbling block to negotiations between them and the government.
The teachers, who have coalesced under the Lesotho Teacher’s Association (LAT), Lesotho Teachers Trade Union (LTTU) and Lesotho Schools Principals Association (LeSPA), embarked on a month-long nationwide strike with effect from 2 August to 2 September to force the government to address their demands.
The teachers, who have vowed to extend the strike until their demands are met, received a massive boost last Thursday when the Labour Court ruled that they should be allowed to go on strike.
This week, LAT representative, Letsatsi Ntsibolane, told the Lesotho Times that the teachers would not barge on their demands.
Mr Ntsibolane said the government should not hide behind the IMF and use its demands for the reduction of the public service wage bill as an excuse to deny them salary increments.
“We will not compromise our stance because of the IMF. We will not barge at all. Let the politicians first reduce their own wage bill. They are giving themselves M500 00 interest free loans yet they want us to compromise.
“Dr Majoro has talked about government officials downgrading to economy class travel for foreign trips, reducing the number of such trips and reducing the number of delegates who travel but the Prime Minister Thomas Thabane recently travelled to China with a huge delegation,” Mr Ntsibolane said.
For his part, Lemohang Molibeli, of the Development for Peace Education (DPE) said instead of freezing salary increments, the government could explore other ways of reducing its huge wage bill.
He said the government could start by identifying and weeding out ghost workers from its payroll.
He further said that the government could also reduce the high wage bill by halting its practice of outsourcing certain task even when it had skilled personnel to undertake those tasks.
“For instance, most government ministries have lawyers within their ranks yet the same ministries still hire private lawyers at higher costs to represent them in their court cases. Why don’t they make use of the in-house lawyers instead of outsourcing the services,” Mr Molibeli asked.