Economy, govt finances remain weak
FINANCE Minister Moeketsi Majoro says that the economy and the government finances remain very weak as a result of low revenue collections and unbudgeted spending by the former seven parties’ government on the June 2017 elections and other unplanned activities.
Dr Majoro said that despite some interventions by the government, the poor state of finances continued from the 2016/17 financial year where the “bleak story” was reflected in the underperforming revenue collections and unplanned additional expenditures to pay for the controversial Bidvest vehicle fleet services tender.
Dr Majoro’s remarks are contained in the Auditor General Report for the 2016/17 financial year which ended on 31 March 2017. The report covers the period when the Pakalitha Mosisili-led former seven parties’ coalition was in power.
“The story of the 2016/17 financial year is relatively bleak,” Dr Majoro wrote.
“It (the 2016/17 financial year) is characterised budget deficit, underperforming revenue collections, unplanned additional expenditures particularly on settling the fleet management obligations and general election costs…extensive budget reallocations, crystallisation of several fiscal risks, increased borrowing and a depletion of government’s cash reserves.”
The scathing report, compiled by Auditor-General Lucy Liphafa, exposes a pattern of abuse of public funds by the former government which managed public money in complete disregard of the constitution, other laws governing public finances as well as international standards on managing public funds.
The report shows that the former government abused a whooping M450 million meant to fund national scholarships.
Part of the M450 million was misdirected to fund the termination of the controversial Bidvest fleet services tender which was mired in corruption as well as the June 3 2017 elections.
The auditor general described the way in which the M450 million was diverted from the government’s Trust Monies Account into the Consolidated Fund as “unconstitutional” and “irregular”.
The former government had already courted controversy by awarding the vehicle fleet services tender to Bidvest without going to tender in August 2016.
The Bidvest deal which was for 48 months, was prematurely terminated in April 2017 at the huge cost of M108 million, the Auditor General’s report confirmed.
According to the AG’s report, M247 389 280 and M107 713 780 were spent on the elections and termination of the Bidvest tender respectively.
Other unbudgeted activities that were also funded through the illegal transfer of funds were salary arrears for teachers and foreign service staff (M16 220 135 and M7 million respectively) and the design for a beef production project (M16, 7 million).
The former government was replaced by the current Thomas Thabane-led four party which assumed power in the aftermath of June 2017 elections.
But as Dr Majoro’s report shows, the advent of the new government has so far failed to significantly improve the government finances.
Dr Majoro said that the “bleak story” of the poor state government finances actually “worsens when combined with recent assessments of Lesotho’s public financial management institution, notably those of the December 2016 external Public Expenditure and Financial Accountability (PEFA) and a more recent Ministry of Finance internal review of its ongoing public financial management reform programme”.
A Ministry of Finance statement issued on Thursday provided more clarity on the financial situation as it showed that despite government interventions through austerity measures and other corrective actions, the foreign currency reserves and cash collections would not be enough to finance the 2018/19 budget.
“Since coming to power, the government has introduced austerity measures that have borne fruit. At the end of 2017/18 fiscal year, the government has managed to reduce the fiscal deficit to 1, 2 percent of national output compared to the budgeted deficit of 9, 6 percent of the 2016/17 fiscal year.
“Despite this already immense corrective action, there are indications that today’s foreign currency reserves and cash collections will fall short of amounts needed to fully finance the approved 2018/19 budget,” the Ministry of Finance said.
The ministry further said that the government had begun talks with the International Monetary Fund and hoped to reach an agreement by the end of August this year for a bailout that would “ease the foreign currency situation”.
Dr Majoro recently told the Sunday Express’s sister publication, the Lesotho Times that the poor state of the economy could also be attributed to the international investors’ reluctance to invest in the country as they were skeptical about the coalition government’s ability to last its full five year mandate.
Lesotho has been plagued by instability in recent years which has seen three elections that have produced three governments in the space of five years from 2012 to 2017.
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