Majoro’s Mid-Year budget Review a masterstroke
THE Minister of Finance Moeketsi Majoro must be commended for coming up with a budget statement given the environment in which it was crafted. It is worth noting that the proposal to introduce a Mid-Year Budget Review that will be used to track progress on the policies outlined in the budget speech is an excellent idea. It will also work as an additional tool to improve budget transparency and allocate efficiency.
The Mid-Year Review provides an opportunity to realign the fiscal framework, projected total expenditures with the realities on the ground.
Also, the proposal to recommend Parliament, its relevant Committees and Cabinet to institutionalise sessions dedicated exclusively to debate revenue policy and pass revenue laws, immediately after passing the budget is a noble suggestion, given that all the recommended pieces of legislation from last year’s budget failed to see the light of the day and hence had an effect on revenue collection.
The budget is still anchored on the volatile Southern African Customs Union (SACU) revenues accounting for 44.5 percent of the revenues, how realistic are they given that the SACU revenues have failed meet targets in the past.
There is need to urgently diversify the economy by meaningfully developing other sectors like horticulture and tourism.
The minister tried to navigate the needs of the country and at the same time ensuring there is enough money coming into government coffers to satisfy ballooning demands.
However, turning to oil, telecommunications and electricity levies as a source of revenue can be a harmful and damaging tactic especially for the country’s poor. While the increases, could be argued to be in line with inflation, so seemingly not drastic, they have an enormous impact on the lives of consumers who rely on every cent to make it to the end of each month. Given the seriousness of the impact of such a decision, I believe it was an absolute last resort by the Finance minister.
The minister is silent; or did not provide much detail on the public sector reforms or measures and steps being taken to rationalise the civil service wage bill. Such measures would help create fiscal space for the government. Such commitments also help when making engagements with technical and developmental partners.
The total expenditure proposal for 2020/21 amounts to M21.9 billion, of which M15.7 billion accounts for recurrent expenditure and M6.3 billion accounts for government capital expenditure.
Recurrent expenditure is too high for a country like Lesotho. The Minister could have done more to address measures of reducing the recurrent expenditure. The budget should prioritise infrastructure rehabilitation and development which ordinarily supports our productive sectors besides other social-economic activities. Huge infrastructure gaps compromise service delivery. The budget should address infrastructure gaps and lend support to key enablers for transformation which are critical in reducing the cost of doing business and supportive of industry and commerce.
One of the key drivers for economic transformation is infrastructure development. Accordingly, it is critical for more resources to be re-oriented towards infrastructure development programmes.
The economy will register growth if more resources are allocated to capital expenditure, like infrastructure development. These, in turn, would create the much-needed jobs and has a multiplier effect on the economy. Currently, capital expenditure is being constrained by the bloated recurrent expenditure bill. Emphasis should also have been placed on improvement in productivity, value addition and growth to match the envisaged salary increments and not to have the increments hinged on temporary and volatile revenues.
Another long-term solution to the fiscal space problem is for government to create an environment that supports private sector-led economic growth. Lasting reforms should empower the private sector, rather than the government, to act as the engine of growth and job creation.
Given the novel coronavirus epidemic and its likely impact on the global economy, it will be important to note that the global demand for exports from Lesotho will be affected and will result in low growth rates. The lockdown in China will have an impact on the local economy as commodity prices will likely trade lower.
The austerity measures of 2019/2020 were done away with and it will be important to understand if the measures achieved their objectives.