Govt is broke: Sophonea
…govt leaders could be asked to take salary cuts if situation doesn’t improve
THE Covid-19 induced slowdown in global and local economic activity has left the government broke and struggling to meet its financial obligations, Finance Minister Thabo Sophonea has said.
Mr Sophonea said they could even consider cutting the salaries of government leaders if the situation does not improve.
The Covid-19 pandemic was first detected in China in December 2019 and began spreading to other parts of the world with devasting consequences.
As the death toll rose, many countries banned foreign travel and imposed lockdowns which brought most economic sectors to a virtual standstill. Although Lesotho recorded its first case on 13 May 2020, the effects were already being felt through a hard lockdown which resulted in the closure of borders, restrictions on inter-country movement and the closure of factories and other economic sectors.
In an interview with Lesotho Times this week, Mr Sophonea said the economic effects of the pandemic were now being felt in the form of lower-than-expected revenue collections.
As a result, the government was experiencing serious cashflow problems. It was barely able to meet its financial obligations, he said.
The forthright minister said it was now necessary, more than ever, for the government to implement a raft of austerity measures he had proposed in his 2021/22 budget speech. He said it was even a miracle that they had not reached the stage where they had to retrench civil servants to manage the astronomical wage bill.
“There has never really been a time when government has enough money,” Sophonea said, adding, “Right now, we are broke because of Covid-19”.
“The economic impact of Covid-19 is stronger than ever. In the previous financial year, when we first recorded infections, we had buffers in the form of revenue from the previous year to sustain us. At this juncture, we are supposed to be using the revenue collected in the midst of the Covid-19 pandemic but we didn’t collect much. So, we are struggling to make ends meet.
“Government has always struggled to meet its financial obligations but it is worse right now because of Covid-19. It is not only Lesotho that is struggling, other countries are struggling including South Africa and America. Other countries have even retrenched civil servants due to this situation which is not peculiar to Lesotho but is a worldwide challenge.
“We are even better because we have not reached the stage of retrenching. We need to study how best we can navigate this economic meltdown because we are dependent on the Americans and British who are also currently broke.
“South Africa is also introducing austerity measures; it has downsized its foreign missions because it is broke.
“We will need to enforce the austerity measures. I clearly tabulated in the 2021/22 budget speech. I clearly indicated how we are going to decrease spending in order to cater for these challenges. We are currently implementing those austerity measures,” Mr Sophonea said.
Among other measures, Mr Sophonea had proposed the implementation of performance-based salary increments for the 2022/23 fiscal year to replace automatic across-the-board salary increments.
He proposed thorough reviews of public entities to weed out ghost workers who had cost the government millions in salaries.
He had also proposed reviewing on-going projects to ensure viability or replacing them with capital projects that will boost economic growth and reduce unemployment.
“We must decrease our consumption,” Mr Sophonea said this week.
“One of the things is to cut spending. For instance, if you say that you are spending M25 every month and things get tough, you cut down your spending and say I can survive on M12, 50 on a monthly basis.
Asked if he would consider reversing the M5000 fuel allowances awarded to MPs, Mr Sophonea said, “some of the budget cuts can be good but their impact is not massive.
“Parliamentarians’ salaries don’t account for much because they are a small group. Yes, we can cut them but the impact is small. You cannot even fund the construction of a road with those cuts.
“There are things that we can look at cutting when the situation gets worse. If the situation gets worse, I may say principals, those who earn higher than others, must take salary cuts. We have not reached that position but we will go there if the financial situation worsens.
“For now, we are implementing austerity measures, including scrapping off automatic notching (of civil servants’ salaries) and investigating the rot in the old age pensions’ fund. About 16 000 ghost pensioners have been removed from the system.
“We are going to use some of the laws which allow us to surcharge people who have unprocedurally procured goods and services on behalf of the government. In most cases those laws are not applied. We just pay the suppliers and we don’t punish the responsible civil servants. We must surcharge anyone found to have violated the procurement regulations. We have also started auctioning government properties like old vehicles. We are doing everything possible to increase our revenue collection,” Mr Sophonea said.
He said the government will still fund all its programmes that had been budgeted for in the current fiscal year.
“All major activities will be catered for if they are covered in the budget…. We are making cuts but that does not mean that major activities will not happen,” he said.
He however, ruled out funding by-elections in five constituencies, saying the Independent Electoral Commission (IEC) had not included them in its budget request.