Africa-Press – Lesotho. The Minister of Finance, Dr Moeketsi Majoro says the government has appealed for assistance from the International Monetary Fund (IMF) on various macroeconomic problems faced by the country.
Speaking at the press conference held in Maseru on Thursday, Majoro said currently the government reserves are near the maximum required to sustain its (government) normal operations as they stand at M1.5 billion.
Government reserve assets are assets that are readily available to and controlled by monetary authorities for direct financing of payment imbalances. Reserve assets may be monetary gold, special drawing rights (SDRs), a reserve position in the IMF, foreign exchange assets consisting of currency and deposits and securities, and other claims.
This indicator is measured in SDRs. The IMF determines the value of SDRs daily by totaling the USD value (based on market exchange rates) of a weighted basket of currencies.
The basket and weights are subject to periodic revision. “We have asked the IMF to assist us figure out how we can put the government reserves back to sustain normal government operations,” he said.
He said the amount of money that is in the reserves is there to maintain a minimum amount of foreign currency reserves in order to protect 1-to-1 parity between Loti and Rand as well as to facilitate Lesotho’s procurement of goods and services from South Africa.
“However in the year 2016/2017, the government used a lot of money from those reserves.
M2 million was taken from the reserve and we are currently at a stage where we will need to make sure we sustain the reserve to the limit which we have set for ourselves thus the need to call for IMF’s assistance,” he said.
He added that Lesotho is at a point where they will need to change the fiscal policy which will allow them not to cross the limit and also work hard to make sure that the country’s revenue exceeds expenses.
Majoro further noted that it is not the first time Lesotho experienced the same challenge as it also happened in 2010 when the economy of the country was really bad and IMF intervened.
He said looking at the state of the economy currently, Lesotho is on a very difficult patch as the current government has inherited the difficult financial and economic conditions from June 2017 and that prevailed to date.
He said some of the reasons that led to the decline in the economy are; construction, banking and insurance due to the fact that there was less construction going on.
“However our expectation is that by the end of 2018, our economy will grow as we are heading on to the construction of Phase II of Polihali Dam.
The difficult macroeconomic conditions were also exacerbated by the extraordinary large fiscal deficit that occurred in the fiscal Year 2016/2017 (9.6 percent of GDP) brought about by government fleet cost (Bidvest Contract),” he said.
Also he said the unplanned elections that the country went for in 2017 and consumed M550 million and some other unbudgeted expenses in the health ministry also contributed.
He said they have already consulted the Cabinet in the matter so that together they can build the country’s reserves. “We will also cut down on certain expenses soon which I cannot reveal at the moment as they are yet to be finalized,” he said.
