REEZWANA Sumad, a research analyst from the Nedbank Corporate and Investment Bank in South Africa, says Lesotho’s cost cutting measures presented in the 2018/19 financial budget are a step in the right direction towards macroeconomic stability.
Finance Minister, Moeketsi Majoro, last week unveiled an austere budget for the 2018/19 financial year, on the back of a tough fiscal environment characterised by low SACU revenue.
“SACU revenue is significantly down in both nominal and real terms. Net International Reserves are below the target we set for ourselves to maintain parity with the rand, while government deposits have finally run out and any fiscal deficit will now have to be financed through new borrowing,” Dr Majoro said during the budget presentation.
“These are new times. Our government now has to bite the bullet and make decisions that would be painful, but which if not taken would impose political and economic chaos on Lesotho.”
Dr Majoro also indicated however, that the government was making head way in bringing down its expenditure.
“On reducing costs of government, the class of airline travel has been lowered from first to business class. A new and entitlement for cell phone benefits has been agreed and published, however its extent of saving will be reviewed at the end of the financial year.”
Dissecting the budget speech during a recent gala dinner that was hosted by Nedbank Lesotho and Lesotho Revenue Authority (LRA) in Msaeru, Ms Sumad said government would save about M1 billion due to the austerity measures which she said was progress towards managing expenditure.
She said she was also impressed by the government’s decision to improve cooperation between different ministries noting that it would be useful in further decline of government expenditure through reduction of duplication of efforts.
“As much as this type of an environment sounds like a rock bottom case, I would like to believe that the only way from this point is upwards, and there are various reasons for this,” Ms Sumad said.
“Firstly, the government has identified that the current fiscal trajectory is unsustainable, and is putting measures in place to try and mediate the strain of the tight fiscus on the economy. Secondly, commendation must go to the Ministry of Finance towards controlling recurrent expenditures. The ministry has announced that through various forms of austerity measures to curtail expenditure they are projected to reduce expenditure budget over the next two years to the tune of around M925 million, and is quite significant as it amounts to 2.6 percent of current GDP.”
She further indicated the move was clear proof of the political will from the authorities.
“Of a long term benefit is the fact that the public sector has undertaken to correct the mistakes of the past government in which the ministries have worked in isolation. The collaboration has been promoted by the private sector is key for business to survive. So why can’t all of these activities be adopted in the public sector as well to improve efficiency and collaborative effort to improve growth.”
She said this lower duplication of work, significantly cost savings, which are high under the current situation.
However, Ms Sumad said she was not impressed by the government’s failure to address its runaway wage bill which needs urgent attention.
She also noted that the private sector needs to be strengthened so that it can draw away workers from the government payroll.
Ms Sumad said she also feels the government needs to stimulate business confidence to spur the economy.
“Confidence and policy certainty are the key points to the growth and economy. You just have to say the right things and indicate that you are doing the right things to get the confidence up,” Ms Sumad said.