FINANCE Minister Dr ‘Mamphono Khaketla has unveiled a largely static but fairly positive national 2016/17 budget with a strong emphasis on reining in the government’s runaway expenditure, saving resources for investment and economic growth as well as exploring new sources of revenue generation among others.
Dr Khaketla’s M17.423 billion budget for the 2016/17 financial year represents an increase of about 6.5 percent from her maiden M16.3 billion expenditure plan for the 2015/16 financial year.
She presented the budget against a backdrop of dwindling receipts from the Southern African Customs Union (SACU), a major contributor of revenue to the fiscus, and the current crippling drought, signaling a few headaches for the minister as she will need to find viable alternatives to fund the expected budget shortfall of about M1.950 billion.
The latest budget proposes total expenditure of about M17.423 billion with recurrent expenditure consuming roughly M11.495 billion while capital spending will take M5.064 billion.
The proposed budget is to be financed through projected revenues of M15.473 billion of which government will provide about M13.370 billion. The government’s provision will come from SACU receipts amounting to M4.593 billion, domestic taxes of M6.251 billion and non-tax revenue of M2.525 billion, leaving a shortfall of about M1.950 billion.
Dr Khaketla proposed funding the shortfall through domestic borrowing, donor grants, loans and drawing down from the country’s reserve fund currently worth about US$600 million.
“It is recommended that it (the shortfall) be filled through a combination of domestic borrowing and drawing down of reserves. The government currently holds reserves worth 6.1 month of import cover (about US$600 million), which slightly exceeds the desired policy target of five months of import cover; this level of reserves leverages the government to fully finance the deficit in the budget,” Dr Khaketla said.
She said revenue performance remained vulnerable to external shocks, particularly the dwindling SACU receipts which have traditionally constituted at least 32 percent of the government’s total revenue. Poor economic performance within the SACU region will result in a negative adjustment of about M1.075 billion in the 2016/17 budget.
Tax revenues, which contribute about 47 percent to total state income, were projected at M6.251 billion, an eight percent increase from the about M5.793 billion budgeted for in 2015/2016.
“Although tax revenue is (sic) projected to continue to grow in the medium-term, the growth is not sufficient to offset the declines in SACU revenue,” Dr Khaketla said.
“This consequently poses a threat to macro-fiscal stability and debt sustainability, and the government’s ability to provide a consistent and predictable support to growth. The changing global economic environment therefore calls for intensified efforts to promote domestic revenue mobilization – both tax and non-tax revenue.”
The minister announced a number of measures to mobilise domestic revenue and mitigate the impact of declining SACU revenues. The Lesotho Revenue Authority (LRA) would intensify revenue collection measures after a restructuring exercise to improve its administrative capacity and client focus. Like motorists in South Africa, Basotho would now be able to personalise their number plates after the introduction of such a scheme by the Ministry of Public Works and Transport. Personalised number plates cost more than ordinary number plates.
The Ministry of Public Works and Transport will also revise the cost of registering vehicles, obtaining drivers’ licences and other services.
Fees and Fines
She said all ministries had been asked to review the various fees and fines they levy to consumers in line with the inflation rate. Rates should be automatically increased annually by the inflation rate to mitigate huge increases in future.
The minister tasked each ministry to gazette regulations to effect the increases. Revised fees will be gazetted in the first quarter of the 2016/17 financial year.
The oily levy will be increased by 2 cents while the government will also explore modalities of increasing the border toll fees to differentiate fees paid by local and foreign registered vehicles, the minister said.
Minister Khaketla also promised to create a conducive environment for the private sector to thrive as a way of providing impetus to domestic revenue mobilisation. To achieve that, the government would revitalise the construction sector as a starting point.
“To this end, the government will earmark some of its sites on prime land in Maseru…..to the private sector to develop on behalf of the government….,”said Dr Khatleka.
“This will not only generate many jobs, but will also generate revenue for both the government and the private sector.
“More importantly, this will improve the landscape of the city, removing the eyesore of the many dilapidated buildings that are dotted around.”
The new budget is M1.074 billion larger than the 2015/16 fiscal year budget, which was about M16.349 billion, representing an increase of about 6,5 percent.
The fiscal deficit will escalate to about nine percent of gross domestic product (GDP) against the government’s set target of three percent.
The Minister said the government could not turn a blind eye to the reality of the rising cost of living and proposed a four percent wage increase across the board. The adjustment would also apply to old age pensions. Income tax adjustments will be made to ensure that the increase does not erode buying power, she said.
Dr Khaketla said the public debt had increased to M867 million mainly as a result of the sharp depreciation of the loti in recent months.
She also spoke of the M48 million the government owes to private sector suppliers. Some of the debts are from as far back as 2012. The minister promised the government’s resolve to clear these debts.
On budget allocations in terms of clusters, the largest allocation of the budget goes to the economic cluster of ministries which will get M3.416 billion for recurrent expenditure as well as economic and infrastructure developments.
Of this figure, about M1.321 billion is proposed for development projects and M2.094.9 million for recurrent expenditure.
Rule of Law
Governance, rule of law and security cluster ministries will take the second largest share of the budget of M2.781 billion.
“The Rule of law is the cornerstone of any nation’s governance. Government proposes an allocation of M2.781.0 billion to the governance, rule of law and security cluster. An efficient delivery of justice, maintenance of the rule of law and the upholding of the Constitution ranks very high among the factors that create an investor-friendly environment. These will have an invaluable result of ensuring that the already existing and flourishing peace in the country is maintained.”
Dr Khaketla presented the budget in the National Assembly in the presence of coalition government parties’ Members of Parliament (MPs), ministers, diplomats, representatives of civil society organizations, among others, but without any opposition MPs present. After attending the tabling of the SADC Commission of Inquiry report in the august house a week ago, opposition parties have reverted to their boycott strategy complaining that their grievances remained unresolved.
The Lesotho Council of Non-Governmantal Organisations (LCN) convened a forum to discuss the budget late Friday after Dr Khaketla had unveiled it earlier in the day. The main speaker at the Forum, Sekonyela Mapetja, the economic justice coordinator at the LCN, expressed concern at the dwindling government revenues, mainly from SACU, but also praised Minister Khaketla for trying to find other non-tax sources of revenue.
But Basotho National Party deputy leader Joang Molapo had earlier in the day described the budget as the “worst ever” as it was not investor friendly.
Chief Molapo said as long as the government did not implement a SADC inquiry recommendation to fire Lesotho Defence Force commander, Lieutenant-General Tlali Kamoli, no investors would consider risking their wealth in Lesotho.