Enact laws to govern public debt: Khaya
LESOTHO’S public debt of M18, 9 billion is too high and needs robust regulation to rein it in, Mechechane legislator, Nyapane Khaya, has said.
The legislator said this in parliament following Finance minister, Thabo Sophonea’s Thursday request for a M2, 5 billion allocation to help the government start servicing its public debt in the 2022/23 financial year. The debts have been accrued over several years and earlier this month, Mr Sophonea said the government owed debtors M18, 9 billion in unpaid loans.
And Mr Khaya attributed the situation to the government’s reckless and unstructured borrowing.
Unless the government develops specific legislation to regulate the country’s borrowing and management of its debt, Mr Khaya said, its public debt could soon become unsustainable.
A former All Basotho Convention (ABC) member, Mr Khaya dumped the ruling party in 2021 to join the Movement for Economic Change (MEC).
“I rise to request M2, 5 billion to be allocated towards servicing the public debt and its interests,” Mr Sophonea said on Thursday.
He said the country’s total debt was M18, 9 billion as of February 2022. This is made up of external debt of M15, 5 billion and domestic debt of M3, 4 billion.
Responding to Mr Sophonea’s request, the Mechachane legislator said Lesotho’s lack of dedicated public debt legislation was the cause of unstructured borrowing which is not adding value to the country’s development.
“We are servicing a huge public debt because we have been reckless in our borrowing.
“For example, Lesotho is currently servicing a M700 million debt with the Exim Bank of India for procuring industrial machinery that is lying unused somewhere. I therefore call upon the minister to come up with relevant laws to guide the way we conduct our national borrowing,” Mr Khaya said.
He said the M700 million loan was secured for the Gender, Youth, Sport and Recreation ministry for youth empowerment through job creation during the 2012-2015 coalition government.
Speaking to this publication after the parliamentary session, Mr Khaya said the haphazard government borrowing had placed Lesotho on the brink of a debt crisis, resulting in a limited borrowing space.
According to the Central Bank of Lesotho (CBL), the country debt levels stood at 57, 2 percent in relation to its gross domestic product (GDP) as of last month. This means Lesotho is just 2, 8 percent away from reaching the 60 percent debt limit as per the South African Development Community (SADC) guidelines.
“If Lesotho was a business entity it would be close to being insolvent due to the large public debt it has accumulated,” Mr Khaya added.
He said the Fraser Solar debacle was one of the clearest indicators for the country to put in place borrowing regulations, which must include approval by parliament.
“The recent problems involving Frazer Solar are happening because we do not have clear regulations on public borrowing.
“At best the regulations we have make it too easy for ministers to initiate loans without thorough assessment on whether we really need such loans, and we can actually afford to repay them.
“Therefore, we need to develop robust laws that will give parliament the powers to approve ministries’ requests for borrowing money.”
Lesotho is currently embroiled in an M850 million lawsuit against a German company, Frazer Solar GmbH for an alleged breach of contract in an agreement allegedly signed by then minister in the Prime Minister, Thomas Thabane’s office, Temeki Tšolo.
A 2012 World Bank study called debt management performance assessment on Lesotho, found that the country had no debt management strategy and no clear policy document.
“In the governance and strategy area, there is a clear delegation to the Finance minister for borrowing and issuance of guarantee, but the mechanisms are not well developed. As a result, policies are inconsistent and debt records are incomplete. There is no debt management strategy and no other explicit policy document in the area of debt management.
“The debt management division is not organised in accordance with the sound practice and as a consequence there is insufficient segregation of duties. There are neither procedure manuals nor business continuity and disaster- recovery plans. The debt records are not complete as domestic guarantees generally are not recorded,” the study found.