MASERU — The International Monetary Fund (IMF) on Monday said Lesotho’s improved economic reforms have enabled the country to adjust to declining revenue from the Southern African Customs Union (Sacu).
An IMF mission representative, Jiro Honda, said the country’s economic reform programme had worked well and its benefits were now evident.
Honda was briefing the media after the IMF’s mission to review Lesotho’s Extended Credit Facility’s (ECF) programme, a project created under the Poverty Reduction and Growth Trusted scheme to provide financial assistance to countries with balance of payments.
“The country’s fiscal position has adjusted to the sharp fall in revenues from Sacu with a shrinking overall fiscal deficit, thanks to strong revenue performance and strict expenditure control,” Honda said.
He said Lesotho’s structural reform efforts had continued particularly in the financial sector and public finance management.
And with these achievements, the country’s economic growth outlook is now improving, despite the recent global recession and other challenges.
Honda said the IMF intends to continue supporting Lesotho “especially after the recent floods and the increase in global prices of food and oil.
“The Lesotho authorities intend to continue their efforts to strengthen bank supervision and financial sector development,” he added.
However, Lesotho still faces challenges.
The combination of the recent floods and the global food and oil price shocks threatens to take a toll on the economy.
“Thus, fiscal policy should address the reconstruction needs and protect the poor from higher food prices while preserving progress towards fiscal sustainability and limiting the impact of higher oil prices on the external position,” Honda said.
He said the IMF hoped that the introduction of the new Financial Institutions Act would help strengthen the supervisory and regulatory framework for banks and other financial institutions.
Lesotho is soon expected to receive about US$9.1 million (over M60 million) from the IMF for its Extended Credit Facility’s (ECF) programme.
Finance Minister Timothy Thahane said the objective of ECF is to advise the country on how to achieve sustainable growth and protect social programmes for the next three years.
“As a result of the current global economic crisis, IMF has been instrumental in supporting developing countries like Lesotho financially and in policy assistance,” Thahane said.
Lesotho has had to rely heavily on the IMF funds to build up the 2011/2012 fiscal budget as the Sacu revenue slid by 32 percent.
Lesotho gets 60 percent of its revenue from Sacu.
A 2011 IMF report had foreseen a drop in revenue earnings for Lesotho fall from M2.2 billion in 2010 to below M2 billion this year.
Honda said the international financial institution expects to finalise a Letter of Intent that summarises the agreement with Lesotho.
“This will allow the IMF executive board to consider the completion of the second review in coming months, allowing the disbursement of the funds,’ he said.
