Statement at the Conclusion of an IMF Mission to Lesotho
An International Monetary Fund (IMF) mission led by Mr. Jiro Honda visited Maseru during the December 2-14 to carry out the second and third reviews under the program supported by the Extended Credit Facility (ECF), consider the authorities' request for augmentation of access under the program, and conduct the 2011 Article IV Consultation.
The mission also exchanged views on the draft National Strategic Development Plan.
The mission met with Finance and Development Planning Minister Thahane, Central Bank of Lesotho acting Governor Matlanyane, other senior government officials, as well representatives of the private sector and Lesotho's development partners.
The mission would like to express its gratitude to the authorities and the staff of the Ministry of Finance and Development Planning and the Central Bank of Lesotho for the highly professional, productive, and open discussions.
At the end of the mission, Mr. Honda issued the following statement:
"Program performance for 2011/12 has been broadly satisfactory.
All targets for March and September 2011 have been met.
In particular, strict expenditure control has translated into a better fiscal position with the fiscal balance for 2011/12 now projected at 13¾ percent of Gross Domestic Product (GDP), despite the costs of rehabilitation of flood-damaged infrastructure.
Structural reform efforts have continued particularly in the financial sector and in public finance management.
For 2011/12, the economy is expected to maintain robust growth, despite the flooding rains in early 2011 and high global food and oil prices.
Real GDP growth is projected at 4¼ percent, mainly driven by large infrastructure projects and a growing mining sector.
International reserves are expected to decline to around three months of imports by end-2011/12. In the near term, downside risks include a deteriorating global economic outlook and uncertain weather conditions.
Going forward, the authorities and the mission agreed with the need to continue fiscal consolidation efforts in order to build up international reserves, while protecting spending for poverty reduction and some priority infrastructure.
To this end, in addition to strict expenditure control, stepped-up efforts for strengthening domestic revenue mobilization are called for.
Any windfall revenues should be saved to build international reserves.
Lesotho has successfully saved a large portion of its Southern African Customs Union (SACU) revenues in 2006-09, which provided a critical cushion against the significant drop in the SACU revenues in 2010/11-2011/12.
The mission reached understandings with the authorities on a policy framework for 2012/13 that could form the basis for the completion of the second and third reviews under the ECF arrangement.
In coming months, the IMF Executive Board will consider the reviews (allowing the disbursement of SDR 11.36 million (about US$12.9 million), the request for higher financing, and the Article IV Consultation.
The three-year ECF arrangement for SDR 41.88 million (about US$64.9 million) was approved on June 2, 2010."