Govt confident of securing IMF support
FINANCE minister Moeketsi Majoro is confident of securing a financial bailout from the International Monetary Fund (IMF) and other development partners to reduce the budget deficit and boost its foreign currency reserves.
Dr Majoro also reassured the public that despite the harsh economic environment, the government will still be able to pay salaries and fund its activities for the entire 2018/2019 financial year.
The government and the IMF have been in discussions over the bailout package since last month and Dr Majoro expressed confidence that an agreement would be reached by the end of next month.
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.
Earlier this year, Dr Majoro announced a four percent salary increase for civil servants but the latter are far from content and this week, teachers announced that they would stage a countrywide strike from 2 August to 2 September to force the government to award them another wage increment.
Dr Majoro has however, indicated to the Lesotho Times that it would not be feasible to award the wage increases due to the poor state of the economy.
He said that the economic situation remains precarious as international investors’ skepticism about the government’s ability to last its five-year term have affected the country’s ability to attract new investments.
He said the government had its work cut out in restoring confidence and growth as it inherited a weak “post conflict” economy where there was only M1, 5 billion in the reserves down from M3, 5 billion in the 2015/2016 financial year.
“In a sense you could call 2015/16 a period of conflict. It was a period of confusion and divisions in society and now we are under-going a post-conflict situation where trust is slowly being restored but it will not happen in an instant,” Dr Majoro said.
“We have been in power for several months and we realise that restoring investor confidence is going to take longer than we thought. I didn’t know this at the beginning and I just thought things would revert to normal like switching on a light.”
This week, Dr Majoro expressed confidence that the government would secure an IMF bailout which would help in reducing the budget deficit and “protect the vulnerable segments of population”.
“I can confirm that we are in discussions with the IMF and other partners to put together a package of measures that would ease the current situation while protecting the vulnerable segments of population,” Dr Majoro said this week.
“Our target to have concluded discussions at the end of August remains. 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.”
He however, 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.
“The exact amount of the financing of the IMF will be determined through negotiations depending on the exact financing gap, the extent of the gap to be covered by reduced spending through austerity measures, the amount other partners will contribute, with the balance to be closed by the IMF.”
The IMF has already told the government to implement tough fiscal measures to improve the economy.
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).
The IMF has also advised the government to award performance-based salary increments. The IMF prescriptions are inimical to the civil servants and other workers’ demands for wholesale wage increments.
Dr Majoro also reassured the public that despite the harsh economic environment, the government will be able to pay salaries and fund its activities for the entire 2018/2019 financial year.
“The government is able to pay its bills including salaries and suppliers and will be able to do so throughout the fiscal year. However, it would be foolhardy to not recognise these macroeconomic challenges and prepare corrective action regarding foreign currency and cash reserves,” Dr Majoro said.