By Mpeshe Selebalo
MASERU — Lesotho’s economy is on the recovery path in line with current global trends, a local economist has said.
Sephooko Motelle, an economist with the Central Bank of Lesotho (CBL) told participants at the National Economic Forum in Maseru on Tuesday that the country’s prospects for recovery were looking good.
The forum was called to engage stakeholders in analysing information on the economic conditions during the 2008 economic crisis and its implications for Lesotho.
The meeting also sought to look at ways in which the government could spur economic growth and development.
“The world is recovering from the crisis it is just bottoming out of the recession. Lesotho has prospects of following global trends,” Motelle said.
“The other factor is that generally the impact of the crisis was minimal more specifically in the domestic financial sector.”
The global economy is projected to grow by 3.3 percent in 2010.
Motelle’s projections are in line with news from the local commercial banking sector indicating that the sector is in a very healthy state as characterised by high liquidity.
Lesotho’s domestic banking sector has often been criticised for its low level of credit that is given to clients which has stunted economic development.
Motelle said the prime lending rate which currently stands at 11.1 percent was high largely due to the high risk that banks have to carry when giving out loans.
He said there were currently no effective mechanisms to identify borrowers in case they defaulted on their loans.
With the first quarter credit-to-deposit ratio at just over 30 percent, the access to credit remained low in the country, Motelle said.
“The role of banks in the economy is to finance innovation in the economy. The ratio of credit to deposit ratio has remained low in the country,” he said.
Motelle said the government was doing all it could to improve access to credit in the market.
He said the proposed changes in the legislative framework will improve the situation in the domestic credit market.
The central bank two weeks ago announced plans to introduce a credit bureau which could likely increase access to credit in the market in the future.
He said it was encouraging to note that there had been a marked decline in the rate of bad debt which stood at about 1.7 percent in the first quarter of 2010.
“The non-performing loans to total assets in banks peaked during the third quarter of 2008 and came down in fourth quarter.
“But generally people have been able to pay their debt which is commendable given the tough times that prevailed,” Motelle said.
Speaking at the same occasion, a local economic development consultant, Limakatso Lehobo, said there were important lessons that Lesotho should glean from the financial crisis.
“There have been flaws in the prevailing economic policy model on issues such as labour policies,” Lehobo said.
“There were cases where investors would just close down their businesses and leave without compensating employees.”
She said Lesotho’s labour policies must be altered to ensure that such incidents do not occur again.
Lehobo added that Lesotho must look at diversifying its economy to reduce dependence on a single line of export products.
She said “there has to be a focus on identifying sustainable sources of government revenue, which will provide consistent sources of revenue”.