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IMF warns govt on unbridled spending

by Lesotho Times
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Bataung Moeketsi

THE International Monetary Fund (IMF) has warned the government against unbridled spending on large scale projects such as the proposed M2, 4 billion construction of new sports facilities including a stadium for the Africa Union Sport Council (AUSC) Region 5 Youth Games to be hosted by Lesotho next year.

The warning comes against the background of recent revelations by the Deputy Accountant General in the Ministry of Finance, Hlompho Matsoso, that the Thomas Thabane administration was deep in debt and owes service providers a whooping M1 billion.

Ms Matsoso’s disclosure was made to parliament at a time when the government is failing to timeously pay service providers. The state has also pleaded poverty when confronted by restive civil servants, particularly teachers and magistrates demanding salary increments.

The government’s debt crisis is borne out of the failure to raise enough money due to declining South African Customs Unit (SACU) revenues. Even though the Lesotho revenue Authority (LRA) met its collection targets for the first time in two years, this was not enough to cover the deficit caused by the declining SACU revenues. Consequently government has been struggling to pay various services providers who-according to Ms Matsoso- are owed a massive M1 billion.

The parlous situation has not been helped by the government’s failure to convince international development partners to lend financial assistance to help balance the national budget. Despite Finance Minister, Moeketsi Majoro’s spirited attempts, the IMF has so far refused to provide a financial rescue package which will help to reduce the budget deficit.

Among other things, the IMF wants 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).

Several meetings have been held between the government and IMF officials over the last two years but the parties are nowhere near reaching a deal as the IMF is still unhappy with what is considers to be unbridled government spending which can only worsen the debt crisis.

And these concerns have been repeated by an IMF team led by Joseph Thornton, which was in the country from 6 to 13 November 2019 “to discuss recent developments and the economic outlook in the context of its regular surveillance activities”.

In addition to the already existing concerns about government profligacy, the IMF raised the red flag over the government’s plans to construct the new M2, 4 billion sports facilities.

“While the authorities’ efforts to maintain economic stability have ensured that international reserves remain at adequate levels, Lesotho continues to face challenges in adjusting to a context of lower SACU revenues,” Mr Thornton said in a statement after his visit.

“With sluggish growth limiting the potential for domestic tax receipts, an improved outlook for government finances will require strong policy actions on spending.

“In this context, effective expenditure controls, including careful vetting of new projects and their financing, will be more important than ever. This particularly applies to large projects, such as the proposed new sports facilities, which have major implications for the country’s debt burden and fiscal sustainability. Investment should support the achievement of key development objectives, including growth, job creation, and poverty reduction.”

So broke is the government that it has been forced to turn to a South African company, Property 2000, for a M2, 4 billion loan to finance the construction of sports facilities for the Africa Union Sport Council (AUSC) Region 5 Youth Games to be hosted by Lesotho next year.

Besides the IMF, the government’s move has been criticised by Ms Matsoso and other senior finance and sports ministry officials.

“We cannot afford that (M2, 4 billion) loan,” Ms Matsoso said in response to PAC chairperson, Selibe Mochoboroane, who had asked her whether government could afford the M2, 4 billion required for the construction of facilities for the AUSC youth games.

“We cannot afford that loan. Government gets most of its cash from the South African Customs Unit (SACU) revenues and that is only M6 billion. All of that money goes to salaries and it is only enough to last for a quarter of the financial year. Thereafter, tax and non-tax collections, which are not sustainable, are used to pay salaries to cover for the remaining three quarters of the financial year.

“Couple that with the M1 billion that government still owes to the service providers and so that means we cannot afford to pay the loan (M2, 4 billion),” Ms Matsoso said.

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