LESOTHO has received a massive Special Drawing Rights (SDR) 66, 9 million allocation from the International Monetary Fund (IMF).
Finance Minister Thabo Sophonea yesterday confirmed that Lesotho had received its share of the SDRs, adding that they would be used to boost the country’s cash reserves.
“We have been given rights to boost our reserves,” Mr Sophonea said in a brief interview with the Lesotho Times.
“I don’t know the exact value of the SRDs. For now, I can only confirm that we have received something from the IMF,” Mr Sophonea added.
The Finance Ministry’s principal secretary (PS), Nthoateng Lebona, also confirmed receipt of the SDRs. She however, refused to say how they would use the windfall which has been given to other IMF member countries.
However, sources within the ministry said 1 SDR is equal to US$1, 419. This means that Lesotho has received the equivalent of US$93, 6 million. This is about M1, 4 billion, a figure that is almost five percent of the current financial year’s M23, 8 billion budget unveiled in February by Finance Minister Thabo Sophonea.
SDRs are an international reserve asset create by the IMF and given to members countries to supplement their official reserves. They are given to countries on the basis of each country’s shareholding in the IMF.
They can also be used to provide countries with liquidity.
The IMF began disbursing the SDRs on Monday. IMF Managing Director, Kristalina Georgieva, said, “the largest allocation of Special Drawing Rights (SDRs) in history—about US$650 billion—comes into effect today (Monday)”.
“The allocation is a significant shot in the arm for the world and, if used wisely, a unique opportunity to combat this unprecedented crisis. The SDR allocation will provide additional liquidity to the global economic system — supplementing countries’ foreign exchange reserves and reducing their reliance on more expensive domestic or external debt. Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the Covid crisis.
“SDRs are being distributed to countries in proportion to their quota shares in the IMF. This means about US$275 billion is going to emerging and developing countries, of which low-income countries will receive about US$21 billion — equivalent to as much as 6 percent of GDP in some cases.
“SDRs are a precious resource and the decision on how best to use them rests with our member countries. For SDRs to be deployed for the maximum benefit of member countries and the global economy, those decisions should be prudent and well-informed,” Ms Georgieva said.
Even pariah countries like Zimbabwe were also given SDRs. Zimbabwe’s Finance Minister Mthuli Ncube celebrated the allocation of SDR 677, 4 million which he said was equivalent to about US$1 billion. He said the SDRs would be invested in fighting Covid-19 as well as agriculture, mining, manufacturing and roads construction.
It remains to be seen how Lesotho will use its own SDRs. Most companies and workers are in desperate need of bailouts to cushion them from the effects of the Covid-19 induced slowdown in business activity.
Textile factories, Lesotho’s biggest employers outside government, have been hit hard by a series of lockdowns which have at times forced them to suspend operations since the outbreak of the pandemic last year.
According to the Lesotho National Development Corporation (LNDC), more than 6000 workers lost their jobs within the manufacturing sector from March 2020 to March 2021 mainly due to the Covid-19 induced slowdown in global economic activity.
More jobs are set to be lost as some of the major textile companies have announced plans to close shop.
Many companies and workers are in distress and therefore need bailouts.
The country also needs to deploy more resources to fight Covid-19, something which is viewed as necessary for the full resumption of economic activities. So far, Lesotho’s interventions, including the procurement of vaccines, have largely been donor or private sector funded.