This is according to a Central Bank of Lesotho (CBL) Quarterly Review of monetary and financial activity for the period March to June 2015. The review notes that the subdued economic activity was a result of the late execution of the budget which was presented by Finance Minister,’Mamphono Khaketla on 22 May 2015.
This was unlike the preceding fiscal years when it was presented in February, resulting in a marked delay in the implementation of the government’s capital projects.
“The index for government activities declined by 29.4 percent in the second quarter of 2015 compared with an increase of 18.6 percent in the previous quarter,” the CBL said.
“The budget speech was only read in May 2015 while the Appropriation Bill was released in June 2015. Similarly, the receipts from SACU (Southern African Customs Union) revenue pool declined by 5.2 percent in June, 2015 as per the approved budget for the new fiscal year, 2015/2016.”
The review also stated that all components of revenue – tax revenue, grants, other revenue sources and SACU receipts – declined in the quarter under review.
“Tax revenue declined by 13.9 percent in June, 2015 relative to an increase of 21.3 percentage points in March, 2015. Taxes on income went down by 11.8 percent while value-added tax fell by 15.2 percent, a reflection of underperformance of government expenditure (the main contributor to the national economy),” it said.
According to the review, Lesotho’s inflation rate took the cue of the subdued South African economy during the period.
“SA’s inflation rate measured 4.7 percent in June 2015 from 4.0 percent in March 2015,” the CBL said.
“Lesotho’s inflation rate, measured as a percentage change in the Consumer Price Index was 2.9 percent in June 2015 from 2.1 percent in March 2015. Food and non-alcoholic beverages, furniture, household equipment and routine maintenance, transport, leisure, entertainment and culture, well as miscellaneous goods and services were the major drivers to the upward trend.”
The apex bank further noted that the construction index declined by 61.6 percent in the quarter ending in June 2015 following a decline of 9.8 percent in the first quarter of 2015.
“The decline was in line with reduced government capital expenditure during the review quarter. The weak performance was a result of unsatisfactory performance by the government and construction subsectors,” the CBL said.
The trade index, which comprises of motor trade, wholesale and retail trade in fuel, and wholesale and retail trade was also subdued during the period under review. It declined by 2.8 percent in the quarter ending in June 2015 compared with a decline of 10.6 percent in the previous quarter.
“This is an indication of lower demand for goods and services in the economy during the review period,” the apex bank observed.
However, it was not all doom and gloom, with the mining and manufacturing sectors remaining resilient during the quarter and registering significant positive growth rates.
“The mining and quarrying index increased significantly by 28.0 percent in the second quarter of 2015 compared with a decline of 12.9 percent in the first quarter of 2015,” the review stated.
“The increase in diamond production was attributed to increased production by both Letšeng and Storm Mountain Diamond mines. Mining operations at Letšeng diamond mine returned back to normal during the review quarter following disruptions due to maintenance works in the last quarter.”
The total manufacturing index increased by 9.7 percent in the second quarter of 2015 compared with a decline of 31.5 percent in the previous quarter.
Said the review: “The increase was attributed to 26.7 percent and 9.7 percent increases in the manufacturing of textiles and clothing, and manufacturing of food and beverages indices, respectively.”
The CBL, however, noted that the performance of the textile and clothing firms usually increased in the second quarter following a dip in the first quarter.
“Thus, the review period’s performance is largely seasonal while there are also indications that the sector grew as a new firm started operations in the category of knit garments,” it added.