By Tšepang Moletsane
Maseru, Feb 12 (The Night’s Watch) – The International Monetary Fund (IMF) says Lesotho finances have eroded after several years of relatively low inflows from the Southern African Customs Union (SACU), and has warned government against increasing wages for state workers.
The IMF staff team, led by Joseph Thornton, visited Maseru from January 29 – February 11, 2020, to conduct the 2019 Article IV Consultations discussions with the Kingdom of Lesotho.
In a statement at the conclusion of the visit, Thornton said the mission discussed budgetary priorities with the authorities, noting that while the SACU revenues may show a brief uptick next year, over the long term the trend is downward.
He said control of current spending would therefore be essential to avoid a reoccurrence of government spending arrears.
In this context, he said, the IMF staff noted that the only sustainable basis for higher public sector wages over the long run would be a stronger and more vibrant private sector, which could provide the necessary tax base.
“Further increases in wages and other perquisites of government workers – already among the highest in the world compared to the size of the economy – risk crowding out essential programs over the short term,” Thornton said in a statement received by the Night’s Watch on Wednesday.
“Ensuring the ability to provide an adequate response to protect the poorest in the event of drought, for example, will require rebuilding adequate buffers, while avoiding the incurrence of large liabilities with dubious benefits in terms of growth or poverty alleviation,” he added.
Lesotho has over the years, been staring at the perfect storm of low economic growth and widening fiscal deficits set against huge expectations and needs.
The needs include the growing base of youth unemployment.
Poverty, hunger and joblessness are high in the country and even higher amongst the youth.
In 2016, the government wage bill rose to 23 percent of Gross Domestic Product (GDP) – the largest in sub-Saharan Africa.
Finance Minister Dr Moeketsi Majoro will present budget for the 2020/2012 financial year to lawmakers on February 26, the finance ministry has announced.
In 2018, Majoro announced that government would from then until further notice, “freeze new position and limit hiring to critical positions only, link notch increases to performance, and introduce voluntary retirement”.
This radical decision was one of the transformation measures adopted by government to urgently reduce the astronomical wage bill.
Salaries for civil servants have taken up an increasing share of budget expenditure over the last decade.
Last year he announced that government had decided against awarding civil servants’ salary increments.
Instead of awarding wage increases for state workers, Majoro unveiled an austerity budget underpinned by a five percent salary cut for cabinet ministers and further proposals to reduce the government’s recurrent expenditure and channel the savings to job creation and other productive sectors, Lesotho Times reported.
Government’s decision not to boost workers’ salaries was met with a fierce response by the Lesotho Public Service Staff Association (LEPSSA), the nearest grouping government workers have to a union, the Post reported.
Seakhi Rankalele, LEPSSA’s spokesperson for Maseru district, said they were angry at the decision.
Rankalele said that had never happened in the ten years he had been a public servant.
The IMF team met with Majoro, Central Bank of Lesotho (CBL) Governor, Dr Retšelisitsoe Matlanyane, Minister of Public Service Tsukutlane Au, other senior officials, and financial market, business, and trade union representatives, as well as multilateral development partners.
It said Lesotho’s economy “remains sluggish, as policy uncertainty, weak regional growth, and recurring drought continue to weigh on growth and depress investment and job creation”.
“While work on the Second Lesotho Highlands Water Project (LHWP) is keeping growth positive, prospects for exports and remittances are unpromising given continued subdued growth in South Africa and depressed prices for key exports,” Thornton said.
He said government finances “have also eroded” after several years of relatively low inflows from the SACU, “with the government incurring new domestic arrears”.
The IMF team also said it discussed policy options with the government that could reignite private sector investment and address Lesotho’s long-standing challenges.
It said measures should focus on improving governance to ensure transparency and accountability in the use of public funds, which should in turn enhance the quality of public service delivery—both infrastructure and services—to the population.
“A strengthened policy environment could be attained through greater consultation with the private sector. The mission welcomed the authorities’ efforts to improve the business environment through streamlining regulations, including through on-line company registration and licensing,” Thornton said. NW