By Thoboloko Ntšonyane
MASERU- The Minister of Finance and Development Planning, Dr Retšelisitsoe Matlanyane has shed light on the country’s resilience, economic strategies and aspirations.
This transpired during the joint sitting of the two houses of parliament last week where she tabled the mid-term budget statement reflecting on the country’s economic performance during the first half of the 2024/2025 financial year.
Themed “Building Resilience, Fostering Growth” underscores the government’s commitment to stabilizing the economy while fostering growth, even amid global uncertainties.
“As we mark this extraordinary bicentennial, let us reflect on the milestones we’ve achieved and strive forward with hope, embracing the boundless promise of the future that awaits.
“The 2024/25 mid-year economic and fiscal review for the Kingdom of Lesotho stands as both a testament to our past efforts and a roadmap to the future we aspire to shape. While we confront enduring challenges such as elevated unemployment and persistent inequality, we also celebrate signs of promise – an encouraging growth trajectory fueled by strategic initiatives that embody the same unyielding spirit that has carried us through two hundred years,” she said.
The Minister indicated that the global economy is projected to grow at 3.2% in 2024, offering a mix of optimism and caution. Lesotho’s strategic alignment with Sub-Saharan Africa’s projected growth of 3.6% seeks to harness regional momentum while insulating against potential exogenous shocks.
She highlighted geopolitical tensions and inflationary pressures as key risks but expressed optimism about regional economic recovery and Lesotho’s positioning within it.
Lesotho’s domestic economy is forecast to grow by 2.4% in 2024, primarily driven by significant infrastructure projects such as the Lesotho Highlands Water Project Phase II (LHWP II) and the Millennium Challenge Corporation (MCC) Compact II. These initiatives are not only stimulating the construction sector but also generating employment opportunities, particularly for the youth.
She said the LHWP II is instrumental in fostering growth and commended it for generating many job opportunities for young professionals in the country.
“Additionally, the government is dedicated to enhancing connectivity through the construction and rehabilitation of roads and bridges to facilitate economic activities. Furthermore, plans are in place to develop hydropower stations, which will bolster the country’s energy infrastructure and lessen dependence on imported energy sources,” she committed.
Meanwhile, challenges remain. The mining sector reportedly continues to grapple with low global diamond prices, and the manufacturing sector, especially textiles, faces waning demand. “These underperforming sectors, which are critical to our economy, highlight the pressing need for targeted interventions to bolster their competitiveness and resilience against shocks. Their contraction underscores the fragility of our growth.”
Despite these hurdles, the Minister remained optimistic about the potential for diversification and innovation-led recovery in these sectors.
According to the reports, Inflation in Lesotho eased to 4.7% in October 2024 due to declining fuel and food prices, alongside currency appreciation.
However, the outlook remains volatile, with domestic food prices exerting upward pressure. It will be noted that during its Monetary Policy Committee (MPC) report tabling last week Tuesday, the Central Bank of Lesotho (CBL) responded by reducing the policy rate by 25 basis points to 7.50%, a move designed to stimulate borrowing and investment.
The country has also seen a robust fiscal position with the Southern African Customs Union (SACU) revenues and water royalties providing buffers.
The Minister reported a projected fiscal surplus of 2.9% of GDP by year-end, attributing it to disciplined expenditure and improved revenue collection. Nevertheless, Lesotho’s heavy reliance on SACU receipts highlights ongoing vulnerability to external economic conditions.
The government’s medium-term fiscal strategy prioritizes revenue diversification, targeting sectors such as agriculture, tourism, and technology for growth.
By maintaining the fiscal deficit under 3% of GDP, Lesotho is said to ensure debt sustainability, currently standing at M21.9 billion. “This figure comprises M3.8 billion in domestic debt and M18.1 billion in external debt. It is encouraging that we have achieved a reduction of M1.3 billion since the start of the fiscal year.”
Dr Matlanyane continued: “The annual inflation rate is projected to increase to 6.5% in 2024 as domestic food prices remain volatile. Despite decreasing food inflation in South Africa, domestic food prices have been volatile, keeping the inflation differential between Lesotho and South Africa wide in 2024.
“Inflation averaged 7.1% in the first half of 2024 with food inflation averaging 9.6%. In the medium-term, inflation rate is forecast to moderate to average 5.5% in 2025 and 5.0% in 2026.”
The Minister reported that the government has collected the revenue to the tune of M13.1 billion. However, this figure, she said, falls short of the ambitious target of M24.1 billion for this fiscal year.
Dr Matlanyane reminded the house that the Recurrent Budget for the fiscal year 2024/2025 was initially M21.3 billion but was revised upwards to M22 billion. On the other hand, the Capital Budget was M9.6 billion and of this, the government would contribute M2.9 billion, M3.5 billion was to be financed by loans and the M3.3 billion would be financed by the grants.
The government has however registered a meagre 25.4% performance of the capital projects which is low. Reacting to this poor performance, the Minister said “Capacity to implement projects effectively continues to be low pointing to the need to build project management skills and capacity within the civil service. This also signifies deficiencies in the current Public Investment Management Infrastructure and arrangements.
The Minister also expressed frustration that the “slow pace of rolling out the investment programme compromises achievement of faster economic growth going forward- making it harder to achieve sustainable growth.”
Sectoral Highlights
Agriculture, tourism and technology were some of the sectors earmarked to drive the growth and job creation through investments and activities of the private sector.
Agriculture
She said the government efforts to modernize agriculture have included training over 2,000 farmers in climate-smart practices and investing M8 million in grants to agricultural value chain beneficiaries. The Pulane irrigation scheme is said to be operational, with several others in progress.
Tourism
With a projected growth of 3.7% in 2024, tourism is poised to benefit from enhanced cultural and natural heritage offerings. Investments in infrastructure aim to further bolster this sector’s growth.
Technology
Dr Matlanyane pointed out that the launch of the National Digital Transformation Strategy 2024 marks a pivotal step in enhancing digital literacy and expanding internet access, crucial for economic modernisation.
Despite ambitious plans, the capital expenditure performance reportedly remains sluggish, with only 25.4% of the capital budget utilized mid-year. The Minister stressed the need for improved project management capacity within the civil service to accelerate implementation and achieve sustainable economic growth.
She quoted Mahatma Gandhi: “The best way to find yourself is to lose yourself in the service of others,” urging collaboration across sectors to drive national progress.