Washington, DC — An International Monetary Fund (IMF) mission led by Mr. Jiro Honda visited Maseru during January 10-23 to conduct the fifth review under the program supported by the Extended Credit Facility (ECF).
The mission met with Finance Minister Ketso, Central Bank of Lesotho (CBL) Governor Matlanyane, other senior government officials, as well representatives of the private sector and development partners.
The mission highly appreciated the opportunity to meet with Prime Minister Thabane and his cabinet, and would also like to express its gratitude to the authorities and the staff of the Ministry of Finance 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: "Despite the drought in 2012, Lesotho has maintained robust economic growth, mainly driven by the mining and construction sectors.
Thanks to the strong response of Lesotho's international partners, the government is able to address most immediate drought-related food costs. The fiscal balances for 2012/13 are expected to record a surplus, further reducing pressures on the external balances. International reserves reached about four months of imports at end-December 2012.
"Looking ahead, while Lesotho's economic growth prospects are robust, downside risks are significant. The main risks arise from the uncertain global and regional economic outlook that could lower Southern African Customs Union (SACU) revenues and external demand for Lesotho's key export items: diamonds and textiles.
"In light of these risks and the need to safeguard the exchange rate peg, we welcome the authorities' intentions to continue their fiscal adjustments in 2013/14 with a view to rebuilding their international reserves buffer to the equivalent of five months of imports over the medium term.
We support their continued commitment to fiscal adjustments, while protecting spending for poverty reduction and priority growth-promoting infrastructure. We also welcome ongoing efforts to improve public financial management, enhance tax administration, strengthen financial sector supervision and regulation, and promote private sector development. We support the authorities' consideration for a civil service reform.
"We expect to finalize the discussions on the policy framework for 2013/14, with a view to proposing for the IMF Executive Board's consideration, the completion of the fifth review under the ECF arrangement. This will allow the disbursement of SDR 5.68 million (about US$8.7 million). The three-year, SDR 41.88 million (about US$64.4 million) ECF arrangement was approved on June 2, 2010 (see Press release No. 10/224), and the Executive Board also approved an augmentation of the program, which has led to a total access of SDR 50.61 million (about US$77.8 million)."