LESOTHO has been struggling with the fallout from the COVID-19 pandemic and a sharp decline in revenues from the Southern African Customs Union (SACU).

Authorities in Lesotho and the mission team from the International Monetary Fund (IMF), an an organisation of 190 countries working to foster global monetary cooperation and facilitate international trade made significant progress in their discussions on policies that could be supported by the IMF under a financial arrangement.

A team from the IMF, led by Aqib Aslam, conducted a series of virtual missions, most recently from September 7 to October 15, to discuss the authorities’ economic and financial programme and their request for IMF financial support.

The authorities and the mission team had productive discussions on policies that could be supported by the IMF under a financial arrangement. The programme under discussion would aim to support a durable post-pandemic recovery, restore fiscal sustainability, strengthen public financial management, and ensure the protection of the most vulnerable. Other key structural reforms to be implemented include strengthening governance and fostering private sector investment to spur inclusive growth and employment over the medium term.

At the end of the visit, Mr Aslam issued the following statement: “Lesotho has been experiencing twin economic shocks resulting from the pandemic and a decline in revenues from the Southern African Customs Union (SACU) that have proved to be highly volatile. Public expenditures have been increasing while SACU revenues were buoyant but have not adapted to their decline and the limited growth in other revenue sources. At the same time, the economy has been in recession since 2017. The resulting fiscal and external imbalances, if left unaddressed, would continue to put pressure on international reserves and lead to government payment arrears.

“Discussions emphasised the need to support a robust and inclusive post-pandemic recovery. To this end, the mission discussed with the authorities a number of options for containing the fiscal deficit to a level that is sustainable and can be fully financed.

“The team noted that the adjustment should be focused on expenditure measurees while boosting poverty-reducing social spending to protect the most vulnerable. Complementary actions include efforts to broaden financial access and inclusion; strengthen financial supervision; modernise the legal frameworks for bank lending, business rescue, and restructuring, and digitalise payment systems.