By: Thoboloko Ntšonyane
MASERU- The Minister of Finance and Development Planning Dr Retšelisitsoe Matlanyane has tabled this week a Public Debt Management Bill, marking a significant step towards improved fiscal governance.
Public Debt Management Bill, 2024 provides the government with an authority to borrow, repay, and guarantee loans, ensuring a structured approach to managing public debt. Additionally, the bill mandates the establishment of debt management committees within parliament, which will oversee the country’s borrowing practices.
The objectives of this Act are to; ensure that financing needs and payment obligations of the government are met in a timely manner at the lowest possible cost and prudent level of risk over medium to long-term; develop and deepen an efficient domestic financial market and support monetary policy objectives.
When passed into law, this Bill will empower the Minister with the exclusive right to raise debt from both domestic and foreign markets on behalf of the government. It further charges the Minister to consult and seek approval of the Cabinet when borrowing on behalf of the government.
When the government plans to implement a project through a public-private partnership arrangement, the bill allows the government to raise and borrow debt for such projects. Additionally, it stipulates that all borrowed funds will be deposited into a “blocked” account held in the government’s name at the Central Bank of Lesotho (CBL).
The Bill proposes among others that the Public Debt Management Department within the Ministry of Finance shall be responsible for mobilization of resources for financing the projects, budget deficit and for purposes of cash management; develop a medium-term debt management strategy and annual borrowing plans and also negotiate with creditors.
It goes on to propose that the Minister shall establish a Public Debt Management Committee which is to be made up of the Principal Secretary for Finance Ministry, Attorney-General, Accountant General, Budget Controller, Governor of the CBL, Director of Macroeconomic Policy and Management Department and the Director of Public Debt Management who will also be the Committee’s Secretary.
This Committee will be charged with the responsibility to among others review and recommend to the Minister the medium-term debt strategy and monitor debt management strategy implementation and coordinate all debt management activities.
After coming into force, this Act will see the repeal of The Loans and Guarantees Act, 1967; The Loans (Statutory Bodies) Act, 1975; The Local Act Loans Act, 2001; The Local Loans (Government Treasury Securities) (Trading) Regulations, 2009 and the Local Loans (Government Treasury Securities) (Trading) Regulations, 2009.
Meanwhile, high debt can significantly impact youth, women, and other vulnerable groups by reducing the government’s ability to provide essential services.
When a country is burdened with high debt, a larger portion of its budget is diverted to debt servicing, leaving fewer resources available for public services such as education, healthcare, and social welfare programmes.
Reduced access to quality education and healthcare hampers their opportunities for economic advancement and overall well-being, perpetuating cycles of poverty and inequality.
In her budget presentation earlier this year, the Minister of Finance and Development Planning reported that the total government debt as of the end of January 2024 was sitting at M22.9 billion. This amount comprises M19.0 billion in external debt (83 percent of the total debt) and M3.8 billion in domestic debt (17 percent of the total debt).
According to the International Monetary Fund (IMF), Lesotho’s risk of external and overall debt distress remains “moderate”.