IMF Staff Completes Virtual Mission to Lesotho

IMF News, October 15, 2021

Source details

Press Release No. 21/300
Mission led by Mr. Aqib Aslam.
Virtual missions conducted most recently from September 7 to October 15, 2021.
Purpose: discuss the authorities’ economic and financial program and their request for IMF financial support.
End-of-mission statement conveys preliminary findings of IMF staff; views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

Lesotho has been struggling with the fallout from the pandemic and a sharp decline in revenues from the Southern African Customs Union (SACU).
The economy has been in recession since 2017.
Public expenditures have been increasing while SACU revenues, which had earlier been buoyant, declined and are highly volatile.
Fiscal and external imbalances, if left unaddressed, would continue to put pressure on international reserves and lead to government payment arrears.

Program objectives under discussion:
- Support a durable post-pandemic recovery.
- Restore fiscal sustainability.
- Strengthen public financial management (PFM).
- Ensure protection of the most vulnerable.
Structural reforms emphasized:
- Strengthening governance.
- Fostering private sector investment to spur inclusive growth and employment over the medium term.
Fiscal policy focus and specific measures discussed:
- Contain the fiscal deficit to a sustainable and fully financed level; adjustment should be focused on expenditure measures.
- Protect and boost poverty-reducing social spending.
- Address the public sector wage bill, noted as one of the largest in the world compared to the size of the economy.
- Save on public sector and official allowances.
- Better target education loans.
- Streamline the capital budget.
- Initiate gender-responsive budgeting.
- Modernize tax policy and improve domestic revenue mobilization.
- Address long-standing PFM issues to ensure reliable fiscal data, integrity of government systems, and sound use of public resources.
Financial sector and inclusion measures:
- Broaden financial access and inclusion.
- Strengthen financial supervision.
- Modernize legal frameworks for bank lending, business rescue, and restructuring.
- Digitalize payment systems.

The authorities and the mission team made significant progress in discussions on policies that could be supported by the IMF under a financial arrangement.
Significant progress was made during the visit, and discussions will continue in the coming weeks.
If agreement is reached on policy measures in support of the reform program, an arrangement to support Lesotho’s economic program would be proposed for the IMF Executive Board's consideration.

Meetings included: Prime Minister Majoro; Minister of Finance Sophonea; Central Bank Governor Matlanyane; other senior government officials.
The team also met with representatives of the diplomatic community, private sector, civil society, and multilateral development partners.
IMF Communications Department media relations contact: PRESS OFFICER Andrew Kanyegirire; Phone: +1 202 623-7100; Email: MEDIA@IMF.org; @IMFSpokesperson

Source: Press Release No. 21/300, October 15, 2021.