Govt-IMF talks continue for financial bailout
FINANCE Minister Moeketsi Majoro says talks are ongoing with the International Monetary Fund (IMF) and other development partners for financial rescue package to help stabilise the economy.
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.
Dr Majoro previously said that an agreement would be reached by the end of August but this has not been the case and it is not clear whether or not a deal will be reached.
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.
The IMF demands are however, inimical to the interests of the country’s restive civil servants who are demanding the government to unconditionally award them salary increments to cushion them against the price increases for most goods and services including food, transport, water and electricity tariffs.
Dr Majoro however, remains confident that the government, IMF and other development partners will eventually ink a deal for a comprehensive package to stabilise the economic and promote growth.
He recently told the Lesotho Times that in addition to the expected financial bailout, Lesotho would have to take additional, “strong actions” to stabilise the fiscal and macroeconomic conditions.
“The government made it clear in July 2017 and February 2018, in its budget speeches that Lesotho and neighbouring countries are undergoing economic downturns and will need to take strong actions to stabilise fiscal and macroeconomic conditions,” Dr Majoro said in an interview with this publication.
“These (strong actions) would include protracted austerity measures and…this might involve working with the IMF and other partners. We are in discussions with the fund (IMF) and other development partners to put together a fully funded adjustment programme.”
Two months ago, Dr Majoro told this publication that he was 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”.
“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 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.
The month of August saw teachers across the country embark on a strike to force the government to address their long-standing demands for salary increments and better working conditions. Textile workers in Maseru and Maputsoe also went on violent strikes to press government to legislate a M2000 minimum wage.
Early this year, Dr Majoro announced a four percent salary increase for civil servants but the latter are far from content and they want another wage increment.
The IMF has however, 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.