Poor financial systems stall projects

 

 

Letuka Chafotsa

MASERU — Economic experts have blamed poor financial systems for delays in implementation
of capital projects such as infrastructure development.

Motena Tšolo from the Finance Ministry’s Macroeconomic Policy and Management Department said it is very hard to achieve the National Strategic Development Plan (NSDP) goals despite the buoyant economic performance due to poor spending of the capital budget.

According to the NSDP, the government seeks to achieve high employment creating economic growth and to develop shared key infrastructure.

Experts said since government spending is lagging as per fiscal year 2013/2014, achieving NSDP objectives would not be easy.

Tšolo said that developing and empowering the private sector as a necessary instrument
for high and sustainable growth is still a challenge if there is low capital spending of the
budget.

She said budget performance implementation delays are caused by the fact that it had
taken government ministries longer than initially anticipated to incorporate ministerial
budgets into the Integrated Financial Management Information System (IFMIS).

“No expenditure can be incurred before budgets are within IFMIS,” Tšolo said.
On private sector development, Ts’olo said allowing the private sector greater access to
credit can breed its development and ultimately a buoyant economy can be realised.

“However, due to the high risk involved incredit allocation, it becomes so difficult for
banks to finance the private sector and individuals,” Tšolo said.

Tšolo further said that the country would in the future see thrilling developments due
to the introduction of new modalities such as the establishment of the new national identification
document (ID).

In Lesotho, there are many instances of people possessing more than one passport, often
under different names. With the new ID system, it is impossible for an individual to register twice or more for the national identity document.

“The importance of IDs is that they will single out an individual or a creditor for financial
institutions to clearly identify unlike the passport system where one can take several
passports using different names”, Tšolo said.

She said it would now be easier for banks to release funds to help in the establishment of
new businesses since it would be possible for individuals to be clearly and easily identified
through IDs which have digitalised security features.

She further said the expected credit bureau would also help in determining individuals
who are credit worthy since data would be available at the bureau.

Economists, on the other hand, believe that the government should concentrate on
reducing regulatory burdens and the cost of doing business in order to stimulate the investment
climate.

According to Mokoena Arthur Majara, a local economist, the civil service is bloated and
must be cut by half in the next five years as a reform measure.

“World-wide recurrent budgets are limited to 20 percent of Gross Domestic Product
(GDP). South Africa is currently at 32 percent (2012 budget speech) despite its massive
social spending which is spiralling out of control and not sustainable,” Majara said.

He said the recurrent budget of Lesotho was expected to register 38 percent of GDP
by the end the current fiscal year (2013/2014) in March.

“The retrenched personnel from the civil service should join the private sector and invest
their terminal benefits there,” Majara said.

However, Majara said such development would require political will never seen before
in Lesotho to execute such a reform.

He said since the country attained independence from Britain in 1966, the civil service had been politicised and used as a reservoir for loyal votes by incumbent governments.

Majara however said that the 2010 Land Act was one initiative in Lesotho that could
bolster economic activity.

“While this Act was a political hot potato, its phenomenal success has proven that taking
unpopular decisions that are founded on good economic principles can save the nation
from the scourge of poverty,” Majara said.

The Act, among other things, enables citizens to access loans through their lease, which as Majara said, was a positive move.

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