‘Mathabana Kotelo

MASERU — Improvement in public fi­nancial management could bode well for Lesotho’s chances of a successor credit arrangement from the International Mon­etary Fund (IMF), senior IMF economist David Dunn said.

He was speaking at a press briefing held at the IMF office on Tuesday to give the media a report on the IMF team’s visit to Lesotho.

Dunn led an IMF team on a 14-day visit to Lesotho where they met with the min­isters of Finance, Development Planning and of Trade and Industry, Cooperatives and Marketing, the Economic Cluster, the Governor of the Central Bank of Le­sotho, Members of Parliament serving on the Public Accounts Committee, as well as senior government officials.

Also present at the meeting were rep­resentatives of the financial sector, the business community and development partners.

Dunn said Lesotho authorities had during their discussions expressed in­terest in an IMF credit extension facility successor programme to the first credit arrangement which ended in September last year.
“Public financial management is very important and improvement in govern­ment budgeting process, cash flow man­agement, internal and external audits of expenditure and other aspects of public finance is imperative for a successor cred­it arrangement,” said Dunn, adding that structural measures to improve these ar­eas are essential.

He commended the ministries of Fi­nance and of Development Planning for steps taken in the implementation of the public finance management reform proj­ect and the project appraisal policy saying comprehensive appraisal of investment projects before being included in the bud­get would ensure that projects have high rates of return and support job-creating growth.

Dunn further stressed the importance of proper management of public finance say­ing, “countries with poor public finance management are prone to waste of funds and failure in achieving social and eco­nomic development goals.”

On Lesotho’s economic performance, Dunn said the six percent Gross Domes­tic Product (GDP) growth in 2013/14 and moderate inflation were signs of robust economic growth.
He however said that high unemploy­ment and widespread poverty, especially in the rural areas, were still major causes for concern in addition to poor health and social indicators.

“The IMF team agrees with the Lesotho government that there is need to strike a new balance between policies for eco­nomic stability and inclusive growth as outlined in the National Strategic Devel­opment Plan”.

Achieving this would, according to Dunn, include an increase in public in­vestment and reducing recurrent spend­ing, particularly the public sector wage bill which at 19 percent of GDP, is among the highest in the world.

“Currently the public sector wage bill is consuming a lot of resources. Around six to eight percent is ideal for a developing economy,” said Dunn.
Dunn and his team are set to prepare a report on conclusion of their visit and return to the IMF headquarters which will form a basis for discussions on a possible credit arrangement programme.