LESOTHO’s new Prime Minister, Sam Matekane has underscored the importance of reducing government spending in order for a country to revive its floundering economy.
Oct. 28, 2022
2 min read
Matekane promises economic growth
Lesotho's new Prime Minister, Sam Matekane
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Research shows that Lesotho’s macroeconomic position has been deteriorating since 2015.
Today, 86 percent of Lesotho’s national budget is absorbed by government consumption, particularly public wages which are estimated at 32 percent of the GDP.
“Our economy has been in recession since 2017. Lesotho's public spending has increased over the last few years and has reached 65 percent of GDP in this financial year. Public procurement, which is roughly 35 percent of our GDP is key in determining the effectiveness of government in delivering essential services, programmes, and projects, but it is arguably worst managed,” Matekane said on Friday this week after his inauguration at Setsoto stadium as the new prime minister.
Government income depends quite heavily on revenue from the Southern African Customs Union (SACU), which is also declining. In 2022/23 the revenue is expected to further decline by 22 percent of the GDP.
“Our economy is driven by government spending, which itself depends on debt finance public investment. The inability of the private sector to play its part in creating employment has led to a situation whereby the public sector has become a critical source of employment for our people.
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“Yet, as indicated above, the public sector itself does not have a dependable income, a situation which is likely to get worse going forward. Sadly, even the high spending in the public sector has not translated into satisfactory performance and high productivity. Ours is all in all a very unsustainable model of economic growth, additionally, the manner in which we spend the little resources that we have also leaves a lot to be desired,” the new PM added.
The country’s capital budget is a tiny 27 percent of the total budget compared to the whopping 73 percent in the recurrent budget.
In real numbers, Lesotho spends only 6.7 billion a year on its development agenda and M18 billion on consumption, largely wages.