Govt on the verge of bankruptcy as Covid-19 bites

  • Finance Minister warns state could fail to pay salaries if pandemic persists

Ntsebeng Motsoeli

Government coffers have been severely depleted due to the impact of the Coronavirus (Covid-19) pandemic. There is a real danger it could soon fail to pay civil servants’ salaries, Finance Minister Thabo Sophonea has warned.

Mr Sophonea last night told the Lesotho Times that Covid-19 had impacted negatively on economic activity leading to lower than expected revenue collections thus far. He did not say how much had been collected by the Lesotho Revenue Authority (LRA) since the pandemic started. The LRA and government had in March 2020 announced some tax holidays to cushion companies against the impact of Covid-19 and that inevitably impacted on revenue collections. He said the M700 million budget the government had set aside for the Covid-19 emergency response was grossly inadequate.

He said the situation was aggravated by the fact that some of the financial aid they had applied for had still not come from international development partners and multi-lateral financial institutions like the World Bank and International Monetary Fund (IMF).

The minister therefore cautioned factory workers, health professionals and other workers against making unreasonable demands as this could lead to a situation where there were no funds to pay civil servants’ salaries.

Mr Sophonea said health and factory workers were “continuously mounting pressure” on the government to meet their allowances and wage demands, forgetting that there were other sectors that were equally affected by the deadly virus.

“They (health and factory workers) make demands without considering our perilous economic situation,” Mr Sophonea said.

“We are yet to face the full storm of Covid-19 and things might get worse than they already are.

“There could be another lockdown and people will need the money more than they do now. The government will not be able to give out any relief funds by then. Things could become so bad that salaries will not be paid.”

Mr Sophonea said the M700 million the government set aside for the Covid-19 response was not enough and there was an urgent need to mobilise more financial support.

He said he could not immediately say how much will be needed but the budget would have to be augmented as Covid-19 infections continue to spike. By yesterday, 256 infections and three deaths had been recorded.

“There is an urgent need to raise more funds as cases continue to increase. We need to adequately equip our quarantine facilities with intensive care beds and ventilators,” he said.

The government is under pressure to pay striking health workers risk allowances as well as  the M800 wage subsidies to factory workers whose incomes were affected by the lockdown from 30 March to May 2020. The government had promised to pay factory workers for three months from April to June to cushion them from their income losses.

Some of the factories are still to return to full production even after the lockdown ended and the  factory workers want more even as the government has struggled to pay all the promised dues.

“The healthcare professionals’ risk allowances amount to M80 million for six months (up to August 2020). These allowances are included in the M700 million budgeted for the Covid-19 response.

“However, the M120 million for factory workers was not included in the M700 million. The government had to suspend some of its activities and projects to cater for the economic and social mitigation measures announced by the former prime minister Thomas Thabane including the subsidies for factory workers. The M700 million was not enough to cater for them.

“The government has since applied for financial assistance from international institutions such as the World Bank and the IMF.

“The government has raised US$7, 5 million from the World Bank. It has negotiated another US$21 million with the bank.  All these monies have not yet been received. We have applied for the assistance under the G-20 countries Debt Service Suspension Initiative (DSSI) to low income countries.

“Under the Smallholder Agricultural Development Project II (SADP II), government has raised US$5 million towards meeting the M100 million funding of the agricultural sector. Government has also negotiated balance of payments support with the IMF.

“In addition, we are still waiting for an actual pledge from the African Development Bank group. All these monies are meant for economic and social mitigation measures,” Mr Sophonea said.



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