THE economic contractions in the country together with lesser Southern African Customs Union (SACU) revenue are worsening Lesotho’s already poor external and fiscal positions.
March 11, 2022
2 min read
Declining SACU revenue hits govt spending
Minister of Finance, Thabo Sofonea
- COVID-19 pandemic and floods instigate extensive social and economic disturbance, deeply impacting many key sectors
- In total, revenue collection including SACU and grants is projected at M19.7 billion
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In his 2022/23 budget speech presented to the media last week, the Minister of Finance, Thabo Sofonea said both the COVID-19 pandemic and flooding had instigated extensive social and economic disturbance, deeply impacting many key sectors.
He said consistent with projected GDP growth of 2.3 percent and inflation rate of five percent, SACU revenue was projected to fall below last year’s collection by M608 million and total M5.4 billion.
In total, revenue collection including SACU and grants is projected at M19.7 billion.
Tax revenue will reach M9.5 billion, grants will average M2.3 billion while non-tax revenue is estimated at 13 percent of the total revenue of M2.6 billion.
“It is at this juncture that I call for a major fiscal consolidation for the next few years,” Mr Sofonea said. “This policy intervention will have to consist of revenue enhancement measures and containing expenditure so as to create adequate fiscal space for future financing investments in jobs, while at the same time ensuring enough foreign reserve shield against likely domestic and external shocks. In the absence of fiscal consolidation, the government risks massive drawdown of deposits for the next fiscal year.”
At the same time, expenditure is projected to cover 53.9 percent of GDP at M23 billion. Recurrent expenditure is projected at M16.3 billion while capital budget is expected to make up 18 percent of GDP, which is about M6.8 billion.
“The outcome of the said outlays will result into net borrowing of M3.3 billion which is estimated to account for 7.7 percent of GDP,” said the minister.
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He noted that this financing gap would be financed through a mix of treasury bonds and treasury bills as well as drawn down of reserves to the tune of M1.3 billion.
On the revenue collection side, Mr Sofonea said the Lesotho Revenue Authority (LRA) had “maintained excellent performance” in support of government’s drive to provide services to the people.
In the previous financial year, the LRA collected M7.2 billion against an estimate of M6.4 billion, amounting to a surplus of M745 million.
In the current financial year, tax revenue collection is projected to be M7.4 billion against the estimate of M6.6 billion, creating a tax revenue collection surplus of M702 million.