The Minister of Finance and Development Planning Dr Retšelisitsoe Matlanyane was at pains last week calling for the government to manage and use fiscal resources in a sustainable manner.
She expressed these sentiments during the tabling of the Mid-term Budget Review during the Upper House and Lower House joint sitting.
The 2023/2024 budget was earlier this year presented under the theme ‘From Reconstruction and Recovery to Growth and Resilience’.
Giving the overview, Dr Matlanyane said “I submit to you that we are on track, and if we are to succeed (sic), we have to do this together. The Mid-Term Budget Statement provides …the global and regional context, within which we have been operating, we will seek stronger alliances.”
Year in, year out, the Auditor-General flags irregular expenditure of the government funds.
She said the government should be managed as people manage their homes arguing that at home they do not spend more than they earn. She said the government has to ensure that there is a return on investment on the projects it wishes to undertake.
We are therefore able to continue the pursuit of the policy objectives presented in the budget speech for 2023/24, as follows: In preparing the budget, we had to strive to balance allocations for more effective service delivery and increased public investment spending that boosts the private sector to generate meaningful growth, and employment opportunities for our youth , we also need to rebuild our buffers to strengthen our resilience as there may be difficult times ahead, and restore our macro fiscal stability to stimulate economic growth.
The overriding objective of the 2023/24 budget is to accelerate inclusive employment, and generate poverty reducing economic growth. I mentioned that it is of utmost importance to recalibrate and reform our institutions and moreover, it is for us, to provide a stable political environment, to allow these institutions to deliver, and operate under systems of good governance, with merit based and result based implementation systems, and operating in a transparent and accountable framework that is aligned with our policy directions.
She continued: “… the global economy continues to struggle through a patchy recovery phase following the wave of shocks from the COVID- 19 pandemic, the Russia – Ukraine war, and global monetary policy tightening. The global output growth is projected to slow down to 3.0 percent in 2023, from 3.5 percent in 2022, before falling slightly to 2.9 percent in 2024.
“Similarly, in Sub-Saharan Africa, growth will decline to 3.3 percent in 2023 from 4.0 percent in 2022 before picking up to 4.0 percent in 2024. We also note the inevitable negative impact of the recent conflict in the Middle East on the global and regional economic outlook.”
Providing the snapshot of the economic performance for the first half of the 2023/2024 performance, Dr Matlanyane highlighted that growth projections for 2023/24 have been “revised down”.
The former Central Bank of Lesotho’s (CBL) Governor indicated that the exchange rate is “less volatile, inflation has softened, and interest rates have declined”.
The real Gross Domestic Product (GDP) growth in 2022 she said was sitting at 1.1 percent, and lower than the 1.9 percent projected for the year. The Minister said the GDP growth performance partly reflected the weak macro-economic fundamentals in 2022 as well as external supply-chain disruptions.
She pointed out that for this year, the quarterly GDP statistics point that real GDP has slowed once again in the first half of the year. The growth during this period, recorded a contraction of 0.7 percent on average.
This contraction she said was largely attributable to “poor performance” in the agricultural sector, which contracted by 9.2 percent on average during the first and the second quarter, with manufacturing sector contracting by 5 percent on average.
The tourism sector, she noted that it recorded “a considerable average growth of 22.1 percent” between the first and the second quarters.
Dr Matlanyane added: “This brings us to the downward revision of annual growth to 1.8 percent by end of 2023/24 from a projection of 2.3 percent. Contributing to the slowdown is manufacturing sector particularly textile sub-sector, which is projected to contract by 2.5 percent as the sector continues to face external challenges coupled with competitive pressure. However, growth in 2023/24 through the medium term, is expected to be driven by LHWP II mega project.”
The Minister further said it is envisaged that revenue is likely to underperform by M2, 4 billion and register M22, 7 billion which is in line with nominal GDP growth which slowed this year. Contributing to this poor performance is tax revenue, which is likely to miss its target of M11 billion by 17 percent, equivalent to M1, 9 billion.
She said according to the interim data on government fiscal operations for half of 2023/24 indicates a budget deficit of 0.3 percent of GDP as at end of September 2023 whilst the target for the year was 2.5 percent of GDP. As such, the “total expenditure for the first half of the year has underperformed”.
“We project an outturn of M22, 1 billion at the end of the year, which is about 56 percent of GDP. Low expenditure is influenced to a larger extend by low capacity to effectively using the provisions in Public Procurement Act of 2023…. the low utilization of the overall budget in the first half of the year, is further influenced amongst others, by delays in implementation of capital projects, a moratorium on hiring intended to contain fast growing wage bill,” she said.
The Minister had also tabled some of the achievements which the government had recorded during this financial year.
While the government was praised for reducing the cabinet size, owing to ongoing political developments where the Prime Minister Ntsokoane Matekane has unveiled seven coalition partners, a move that reconfigured the government setting after the swearing in of five ministers last week. The deputy ministers will also be sworn in at a date to be announced by the government.
- The setting up of the Millennium Challenge Account (MCA) Compact 2 office. It is expected to kick start work in April next year provided the government pass certain laws that the United States wants enacted.
- The procurement of 51 police cars.
- The lighting of Maseru city.
- The rehabilitation of roads country wide.
- Secured Double Taxation Agreements with Mauritius and agreements have been signed with United Arab Emirates (UAE) and Malawi awaits ratification.
- Training Diplomats in Investment and Trade promotion to enhance commercial relations with countries where Lesotho has representation.
“We are all very much aware of our resource constraints and our many needs, and it is an absolute necessity for us to focus on key priorities and sequence our programs carefully to derive
maximum value and impactful outcomes,” said the Minister of Finance.