By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)- Real Gross Domestic Product (GDP) growth of highland African kingdom of Lesotho has remained strong in 2013/1 at around 6 percent (6%) according to the International Monetary Fund (IMF).
This is coming on the heels of the IMF’s team led by David Dunn, who visited Lesotho to discuss on economic policies in the context of the 2014 Article IV consultation.
Dunn said despite the robust economic growth unemployment in the country remains high and poverty is still widespread, especially in rural areas, while inflation has come down slightly to 5.1%, year-on-year (YoY) in December 2013.
“Lesotho’s economy has performed well in recent years, despite a severe fiscal and balance of payments shock and adverse weather conditions for agriculture. Growth in real gross domestic product (GDP) averaged just over 5% a year between fiscal year 2010/11 and 2012/13 (April-March), while inflation remained moderate’’ Dunn said.
He affirmed that having a sufficient buffer of official international reserves was critical to this positive outturn.
Dunn said when revenue from the Southern African Customs Union (SACU) dropped sharply in 2010/11 and 2011/12, Lesotho’s international reserves ensured that the loti’s hard peg against the South African rand remained firm. ‘’In addition, fiscal discipline was maintained so that when SACU revenues eventually recovered in 2012/13 and 2013/14, the authorities were able to successfully rebuild international reserves and fiscal buffers’’ he affirmed.
“The IMF team agrees with the Lesotho authorities that the time is right to strike a new balance between policies for economic stability and inclusive growth, as outlined in the National Strategic Development Plan,’’ he said.
Dunn further affirmed that reducing recurrent expenditures—most notably, the public sector wage bill, which is among the highest in the world (relative to GDP)—would be critical for increasing space for investment spending.
Also, the IMF endorsed Lesotho’s new Financial Sector Development Strategy (FSDS), which calls for the sound expansion and deepening of financial services. ‘’Implementing the FSDS would improve access to finance to private businesses, helping private sector development,’’ the IMF said.
The Fund says it stands ready to support the efficient implementation of the FSDS with technical assistance; while encouraging the country’s authorities to continue to make progress with on-going reforms to improve the business environment and other measures to enhance Lesotho’s international competitiveness, which will be critical for job creation.
