- The International Monetary Fund (IMF) in a review of Lesotho's recent economic development and fight against poverty found that the country had "made commendable progress," the Fund today reports. The evaluation however failed to look at actual levels of poverty among the country's drought-ridden population.
In commenting on the IMF's discussion on Lesotho, Shigemitsu Sugisaki, IMF Deputy Managing Director said that the small mountain Kingdom since last year had "made commendable progress" under its programmes to reduce poverty, which are partly financed by the Fund.
Based on this "progress" in line with the Fund's economic prescriptions for poor countries, it had thus approved a US$ 5.2 million disbursement for Lesotho, within the conditional poverty reduction programmes of the Maseru government.
- Economic growth has remained satisfactory, commented Mr Sugisaki, "benefiting from strong textiles exports to the United States." Further, consumer price inflation had declined, "in line with developments in South Africa."
Nevertheless, Lesotho was said to face "many serious challenges in the years ahead, including falling agricultural productivity, the potential loss of trade preferences, and the high incidence of HIV/AIDS," the IMF director warned.
The Fund's review of "Lesotho's economic performance" during the last year - which is supposed to be in line with the IMF's poverty reduction and economic growth philosophy - focused on macroeconomic trends and structural reforms.
Except for the short reference on the HIV/AIDS pandemic, affecting one third of the Basotho population, Mr Sugisaki's review was not taking notice of developments affecting the country's people at large. During the last years, continued drought and the AIDS pandemic have driven thousands of households into further poverty and desperation, despite all government programmes to fight poverty.
- The authorities have recently taken spending and revenue measures to contain excessive levels of domestic borrowing and reduce the fiscal deficit, Mr Sugisaki on the other hand concluded in his review. "They now expect to reduce domestic borrowing for 2003-04 to a level below that in the original programme."
According to Mr Sugisaki, Basotho authorities had also made progress in "strengthening tax policy and administration. Although revenue collection has lagged program targets, the introduction of the value added tax and establishment of the Lesotho Revenue Authority (LRA) should improve the tax structure and lead to improved tax administration performance," he added.
No mention was made on how the increased prices, produced by the newly introduced taxes, may have affected the poor majority of the Basotho population.
In the IMF review, authorities in Maseru were further said to be cutting "non-priority expenditures to ensure that programme targets are met, but need to support these measures with further reallocation of resources to human capital and infrastructure development."
According to the Fund's assessment, a critical part of the government's poverty reduction programme is to "improve public expenditure management." Recent initiatives had included restarting the auditing of public accounts, improving forecasting, budgeting, and accounting within the public sector, and developing institutions to improve governance, Mr Sugisaki informed.
- The authorities have begun removing structural impediments to financial development, including through partial capital account liberalisation, and deregulation and privatisation in the financial sector, said Mr Sugisaki. "They need to deepen reforms to foster competition in the financial system, strengthen property rights and the judiciary, and improve credit for small and medium-sized businesses," he added.
Lesotho's Poverty Reduction Strategy Paper (PRSP), which according to the Fund "has been prepared through a broad-based participatory process" and together with the IMF, was "expected to be finalised in early 2004," stated Mr Sugisaki. With this strategy paper, the Maseru government may ask for more conditional credits from the World Bank and the IMF.
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