- Lesotho's budget for the 2005-06 fiscal year this week was presented in parliament. The budget foresees a higher tax threshold "to give a break to low income earners," decentralisation and other reform efforts and more spending on education and the HIV/AIDS pandemic.
The government of Lesotho will raise the income tax threshold from maluti 880 (US$ 148) to maluti 924 (US$ 156) per month, the Minister of Finance and Development Planning, Timothy Thahane, has announced during his presentation of the 2005-06 budget. The budget is a product of consultations with the IMF.
This tax threshold rise was being implemented "because for a number of years the country has not reviewed its income tax scales which have been eroded by inflation," the Maseru government said in a statement. "This is meant to give a break to low income earners. There will also be an across the board salary adjustment of five percent for civil servants," the government statement added.
The new budget was announced earlier this week by Finance Minister Tahane in his annual budget speech in parliament. A total expenditure of maluti 4,772.18 million (approximately US$ 803 million) has been proposed for the 2005/06 financial year.
According to the budget speech, five main targets had been set for the 2005-06 fiscal year. Firstly, this was to "implement the strategy for poverty eradication and wealth creation." Other main targets included the acceleration of economic growth and to create jobs, "especially for the young people." On the social side, the budget aimed to "expand access and improve the quality of education and health services for all Basotho" and to "scale up the fight against HIV and AIDS."
The Minister also announced a maluti 50 million (US$ 8.2 million) allocation from the recurrent budget, to 128 Community Councils and the Maseru City Council to meet the costs of the envisaged Councils and related institutions such as the newly created offices of District Administrators.
This was, however, an interim measure since "decentralisation is only meaningful if financial responsibility is also bestowed on the Councils," Minister Thahane said.
The government of Lesotho further announced that it was to "update and modernise the various financial services laws relating to insurance, pensions, hire-purchase agreements and motor vehicle compensation," according to the statement.
The International Monetary Fund (IMF) has been strongly involved in the preparatory works for Lesotho's budget. The budget thus follows the IMF's advises on structural reforms and an enhanced revenue basis for government. Among the reforms favoured by the Fund are decentralisation and strengthening of the financial sector through liberalist legislation and regulations.
On the education front, Minister Thahane cautioned Basotho that "with the success of the Free Primary Education project openly evident, the country must find the resources to have enough secondary schools to receive the first of the project's batch of scholars finishing Class Seven as it comes off in January 2007."
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