Mohloai Mpesi
MINISTER of Finance and Development Planning, Retṧelisitsoe Matlanyane, says that Lesotho is “safe” and does not need relief from the burden of external debts.
According to Dr Matlanyane, while Lesotho does have external debts, seeking relief could send negative signals that the country is in financial distress, which she says is not the case currently.
Dr Matlanyane spoke on Tuesday at Prime Minister Sam Matekane’s media briefing at State House.
Dr Matlanyane had been asked if Lesotho had sought assistance from China to repay its external debt during the Prime Minister’s recent visit for the China-Africa summit.
This after a recent African Development Bank (ADB) Country Focus Report, which worried about Lesotho’s high debt levels. The report noted Lesotho’s external debt to the Republic of China alone accounted for 70 percent of the country’s Gross Domestic Product (GDP).
According to the report, Lesotho’s external debt accounts for 74 percent of the total public debt and was predominantly owed to multilateral partners on concessional terms.
But Dr Matlanyane asserted that Lesotho’s warm relations with China, meant that some of the loans from the former, ended up being converted to grants “due to the prevailing cordial relations”.
“The portfolio we have with China is very big. China helps us in different ways, with concessional loans, interest free loans and grants,” Dr Matlanyane said.
“Luckily, we have warm relations with the People’s Republic of China, so much that even in instances where we took interest free loans, we start paying and after some time, they convert those loans into grants.
“That, therefore, makes things easy for us and our debt portfolio with China. Although it is big, it is not wholly a loan. This is because they are sometimes converted to gifts or grants.”
She emphasised it was not necessary for Lesotho to seek debt relief as the country was still in good standing.
Asking for debt relief would send a negative signal that Lesotho was burdened with debts and could not afford to pay its way out “whereas that is not the case”.
“Although we have an opportunity to speak with the People’s Republic of China on debt relief, we don’t see a necessity to do that currently. Seeking debt relief can either have a positive or negative impact,” she said.
“This is because once we talk about debt relief, we signal that we have a problem and that is the signal we don’t want to send, especially because we don’t have a debt problem currently.”
She said the International Monetary Fund (IMF) had commended Lesotho, declaring that the country was in good standing as far as its debt was concerned.
She said the government had worked tirelessly over the past twenty months to reduce the country’s debt.
“Lesotho is one of the countries that are commended for paying their debts. China even indicated that we pay our debts well…”
Meanwhile, an IMF report issued last week said Lesotho had limited space to absorb shocks, advising the government to use fiscal surpluses “to attain a lower public debt path down to 50 percent of GDP”.
“At 60 percent of the GDP, public debt under the baseline is relatively high and is the maximum allowed under the authorities’ announced medium term fiscal strategy. Moreover, the risk of debt distress is rated as “moderate” under the DSA (Debt Sustainability Analysis), with limited space to absorb shocks.
“Much of Lesotho’s external debt is concessional, but a sizable portion (26 percent of external public debt) is on commercial terms. So once reserves exceed comfortable levels (possibly, six months of imports), the authorities should use fiscal surpluses to attain a lower public debt path, including by avoiding Lesotho’s most costly liabilities.
“Staff analysis suggests that this approach would bring public debt down to 50 percent of GDP over the course of 5 years (45 percent of GDP in present value terms), a level consistent with preserving the peg and preventing a sudden deterioration of Lesotho’s debt distress rating,” the report reads.
