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Govt expenditure rises

LRA boss Thabo Khasipe


Feb. 13, 2021 2 min read

2 min read


LESOTHO’s tax revenue GDP ratio is high compared with those in Sub-Saharan African countries overall, but low in comparison to those in other Southern African Customs Union (SACU) Members States.

 

This is according to the Social Protection and Jobs report that was released by the World Bank two weeks ago.

This year however, revenues are likely to be affected with the country’s economy remaining subdued due to the ongoing COVID-19 pandemic, slower economic activity means less revenue collections.

In the five years from fiscal 2011/12 through fiscal 2015/16, total revenue ranged from 47 to 53 percent of GDP, with tax revenues accounting for 35 to 44 percent of total revenues and 20 to 22 percent of GDP.

“Lesotho’s government revenue performance has been strong thanks to large revenues from taxes and from SACU,” the World Bank said in the report.

But, while tax revenues have been rising steadily, SACU revenues have declined in recent years, driven by an economic slowdown in South Africa.

South Africa’s economy has a huge impact on Lesotho, with the country importing almost everything from its only neighbour.

If economic conditions in South Africa hit the rocks, automatically Lesotho also suffers as most Basotho are also employed in South Africa.

While the country has been performing relatively well through tax revenue collections, government spending has also been increasing relative to GDP and compared with levels in other countries in the region, including SACU members.

“In recent years, the overall budget has been equivalent to at least 50 percent of GDP. The recurrent budget has accounted for at least two-thirds of the total. The high recurrent spending reflects a large public sector wage bill, due mainly to generous pay and benefits,” the report further showed.


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The International Monetary Fund (IMF) had suggested in the past that control of current spending in Lesotho is essential to avoid reoccurrence of government spending arrears. 

The IMF revealed in their own assessment that government finances have eroded after several years of relatively low inflows from SACU, with the government insuring new domestic arrears.

 

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