MASERU — The International Monetary Fund (IMF) has opened an office in Lesotho to offer technical and financial support to the country’s economic reform programme.
The IMF representative in Lesotho, Michael Anthony Tharkur, told a press briefing on Thursday that the country had performed well under the IMF-supported programme.
Tharkur said the new office will seek to promote sound macroeconomic policies through dialogue with the government.
It will also assist the Central Bank of Lesotho (CBL) to help inform public debate on important economic policy issues by interacting with key stakeholders.
Tharkur said for the past two years, Lesotho had experienced a series of shocks including a sharp drop in Southern African Customs Union (Sacu) revenues.
The country’s economic performance was also affected by devastating floods last year in some parts of the country and continued high international commodity prices.
To address these shocks, Lesotho initially relied on its historically large buffer of international reserves to continue financing both private and public sector import demands.
“But, with these reserves dwindling, tightening of fiscal policy was also necessary as a means of containing excess local currency available for purchase abroad,” Tharkur said.
He added that this year the government had committed to maintaining a prudent fiscal policy, with a small fiscal surplus, as part of its effort to rebuild the reserves buffer policy over the next few years.
“We support this stance and the broader medium-term economic strategy anchored by prudent fiscal policies to help rebuild international reserves.
“But let me emphasise that in this pursuit, we also support the government’s commitment to adequately protect social and key infrastructure spending.”
Tharkur said Lesotho’s medium-term economic outlook, while favourable, carried risks.
A relapse of the fragile global economic recovery could trigger further drop in volatile Sacu revenues and in global demand for Lesotho’s exports.
Should this happen, the country will need to be prepared to sustain economic activity and to avoid painful policy adjustments.
Speaking at the same briefing, Finance Minister Timothy Thahane said the government agreed on a three-year refom programme supported by the IMF in April 2010.
The programme, amounting to M550 million, is intended to support the country’s financial and economic reforms aimed at limiting the adverse effects of the reduction in Sacu revenue.
Thahane said the IMF has also commended Lesotho for improving its anti-money-laundering framework.
He added that the Fund was also pleased with the government’s steps to increase access to financial services, especially in the rural areas and for small and mediums enterprises as a way of creating employment.
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