- The economy of Lesotho continues to perform well despite the stresses caused by a serious drought, according to the newest assessment by the IMF. The Basotho government had generally been able to stick to its economic reform plans and therefore was to receive a US$ 5 million disbursement.
The International Monetary Fund (IMF) today stated it had completed a review of Lesotho's economic performance under the so-called Poverty Reduction and Growth Facility (PRGF) arrangement. As a result, Lesotho would be able to draw up to US$4.98 million) under the arrangement immediately.
IMF Deputy Managing Director Shigemitsu Sugisaki today said the Fund had found positive developments in Lesotho's economy. "The economy of Lesotho continues to perform well under the PRGF-supported program, despite the stresses caused by a serious drought," he said.
Economic growth last year was stronger than expected, and inflation had fallen back, the IMF noted. Competitiveness had been maintained, and exports, in particular textile exports, were strong. "The strong and quick response of the authorities, hand in hand with considerable assistance from bilateral and multilateral donors, helped avert development of a full-blown food crisis in Lesotho last year," said Mr Sugisaki.
- Lesotho's economic program has been generally on track, but fiscal slippages emerged in the first quarter of 2003, partly as a result of agricultural support spending related to the drought, commented the IMF director. "Corrective measures" were however taken "to bring the budget back to a sustainable basis."
Further, considerable progress had been made in the area of tax administration, the IMF held. Establishment of the Lesotho Revenue Authority and the upcoming introduction of a value-added tax were to "bolster the efficiency and transparency of revenue collections and help to address budget pressures." In the period ahead, administration of the Treasury was therefore to be strengthened.
- The progress made so far in finalizing the Poverty Reduction Strategy Paper provides a sound basis for support for Lesotho's poverty reduction and social development efforts by the international community," Mr Sugisaki concluded. The upcoming budget had "a strong focus on social and poverty reduction programmes."
Accordingly, the IMF had granted the authorities' request for a new disbursement related to domestic financing of the government. The authorities were "firmly committed to securing a sound medium-term fiscal position, through increased revenues and a disciplined and targeted approach to expenditures," according to Mr Sugisaki.
Lesotho's three-year Poverty Reduction and Growth Facility (PRGF) arrangement was approved on 9 March 2001 in an amount equivalent to US$ 34.87 million. So far, Lesotho has drawn US$ 19.93 million. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5 ½-year grace period on principal payments.
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