MASERU – Finance Minister Timothy Thahane on Friday said Lesotho must mobilise more domestic revenue in the wake of declining income from the Southern African Customs Union (Sacu).
Presenting his budget speech for the 2010/2011 fiscal year to parliament, Thahane said there was need to mobilise resources on the domestic front and stop relying solely on Sacu revenues.
Thahane called on all Basotho to tighten their belts “and use this (economic) crisis as an opportunity to mobilise more domestic revenues and cut wasteful expenditures, fraud and corruption in all government activities”.
“It calls on all of us to reverse a growing culture of dependency on handouts from the state and to adopt a long-term fiscal strategy that aligns expenditures to long-term domestic revenues and not Sacu revenues,” Thahane said.
The finance minister said the Sacu revenues are unpredictable and could therefore not be used as the basis of policy planning.
“The Sacu imports are difficult to forecast or predict because they depend on policy developments elsewhere in the world of trade,” Thahane said.
The finance minister said the 2010/11 budget had been prepared in the context of “weak global and sub-regional economic performance resulting in a decline in revenues, especially customs”.
“As a result, Sacu shares which have traditionally contributed about 60 percent to our revenues are now projected at M2.162 million, representing a decline of M2.756 million between 2009/10 and 2010/11.
“This means the government’s ability to finance its expenditure has been reduced by an equivalent amount,” Thahane said.
He called for “an aggressive belt-tightening in expenditures by reducing waste, inefficiencies, fraud and tardiness in delivering services to the public”.
For example, the minister said international travel for government officials and ministers was being reduced back to 2007/08 levels.
Thahane said the government had also eliminated the buying of new furniture as well as the holding of training workshops.
Also eliminated is the short-term hiring of vehicles while expenditure on goods and services have also been drastically reduced or cut.
Thahane said the government was also revamping its revenue collection methods.
“In this context, the government is considering extending the mandate of the LRA (Lesotho Revenue Authority) to collect all revenue for the government,” he said.
“The government will also review operations with a view to letting the private sector manage under contract those services which it can do better than the government.”
Thahane said the government was committed “more than ever” to “exercise utmost prudence in the allocation and use of public funds with continued and greater focus on expenditure controls that would result in growth, improved service delivery and reduction in vulnerability”.
Thahane said Lesotho’s economy was “unhealthily dependent on the textile sector” and to cut this dependence “we need to develop adequate industrial infrastructure to support alternative production, including agro-industries”.
He set aside M191 million of the capital budget for the construction and maintenance of urban and rural roads while M59 million was set aside for the financing of industrial infrastructure development in Maseru.
The finance minister also set aside M418 million for the development of water supply projects across the country. M146 million of this amount is for water supply projects in rural areas, Thahane said.
A further M107 million was set aside to develop projects for the “electrification of rural areas with the provision of renewable energy in areas where the conventional grid supply is unavailable”.
He said the government will this year engage potential financiers to increase the capacity of the ‘Muela Hydropower Project to generate more electricity for Lesotho.
Thahane allocated a further M19 million to the tourism sector to finance the building of a national museum and complete the Maluti Conservation and Development Project.
The minister expressed disappointment with the continued decline in the agriculture sector.
He said the government will this year set up a joint task team between the ministries of finance and that of agriculture and food security to develop an investment programme for the sector.
The task team is expected to examine and propose an action plan to develop marketing of agricultural outputs.
It will also seek to find ways of re-energising “the wool and mohair industry by increasing the quality and quantity of wool and mohair produced in Lesotho through training of wool farmers in better husbandry, shearing, sorting and classifying of wool”.
The task force will also be expected to re-energise and commercialise the dairy industry and create a viable commercial sub-sector of chicken layers and broilers as well as piggeries, an abattoir and cold storage.
The finance minister also announced a 3.5 percent increase in salaries for all civil servants which he said was a modest raise given the current annual inflation rate of 4.2 percent.
Budget highlights at a glance
- Civil servants awarded 3.5 percent salary raise
- M300 million has been set aside for old age pensions
- M469 million has been set aside to finance scholarships
- M51 million set aside to support building of factory shells at Ha Tikoe and Ha Nyenye
- M191 million set aside for the building and maintenance of urban and rural roads
- M154 million allocated to water and sanitation infrastructure
- M107 million has been set aside for rural electrification projects
- M19 million set aside for the construction of a national museum and completion of Maluti Conservation and Development Project