International Monetary Fund approves US$8.6m for Lesotho

The Board of the International Monetary Fund (IMF) has approved an amount equivalent to Special Drawing Rights (SDR) of 5.68 million (about US$8.6 million) for Lesotho. An IMF statement, made available in New York, on Monday said that the Board’s decision was based on the completion of the sixth and final review of Lesotho’s performance under the programme supported by the Extended Credit Facility (ECF) arrangement.

The IMF said that the approval brought the total disbursements under the arrangement to an amount equivalent to SDR 50.605 million (about US$76.6 million).

It stated: ‘The authorities have expressed interest in a successor arrangement, which would expedite achieving the medium-term reserve target, help address structural weaknesses, and catalyze support from its international partners’.

It recalled that Lesotho’s three-year ECF arrangement was approved on 2 June, 2010, with total access equivalent to SDR 41.88 million (about US$63.4 million).

‘To cushion the impact of the 2010-11 flood damage and high international commodity prices, the IMF’s Executive Board approved an augmentation of access of 25 percent of quota in April 2012, bringing total access to SDR 50.605 million (about US$76.6 million), under the ECF arrangement,’ the statement noted.

Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Board’s Chair, said: ‘Lesotho’s macroeconomic policies, supported by the ECF arrangement, have served to ensure macroeconomic stability and secure robust growth’.

He, also said that, ‘despite a series of adverse shocks, including the fall in Southern African Customs Union (SACU) revenues in 2010–11 and weather-related shocks in 2011 and 2012, fiscal and external sustainability have been maintained’.

According to him: ‘Economic growth has been robust for the last three years, while inflation has subsided, reflecting moderation in international commodity prices’.

‘The authorities remain committed to prudent fiscal policies. With fiscal adjustment efforts and the recovery of SACU revenues, in 2012/13, a fiscal surplus was recorded for the first time since 2008/09.

‘In light of the downside risks associated with the global and regional economic outlook, it will be important to maintain prudent fiscal policies by containing recurrent spending and improving revenue administration,’ he stated.

Mr. Shinohara added that, ‘such a policy stance will help Lesotho achieve reserve coverage of five months of imports, its medium-term target for international reserves’.

‘To support the implementation of prudent fiscal policies, further progress in public financial management and civil service reforms is needed. The establishment of the Cash Management Unit and the monthly reconciliation of all treasury accounts will help improve expenditure control and the monitoring of revenue collection,’ the IMF official stressed.

He, however, noted that, ‘the authorities have made progress in improving the business climate and promoting private sector-led growth, with developing the national identification card system’.

‘The Central Bank of Lesotho continues to improve the regulatory frameworks for banks and nonbank financial institutions to promote financial sector developments with proper supervisory oversight.

‘The authorities’ strong policy efforts, supported by the ECF arrangement, have helped attain macroeconomic stability and strong growth,’ ‘Given the economic challenges that Lesotho still faces, continued engagement with the Fund should further support the authorities’ efforts, building on the progress under the current arrangement”, Mr. Shinohara stated.

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