Government, IMF ink COVID-19 relief agreement

MATHATISI SEBUSI

MASERU – Lesotho is expected to meet its pressing balance of payment needs stemming from the outbreak of COVID-19, following the approval of US$49.1 million in emergency support to address the pandemic.

The IMF on July 29 sanctioned disbursement of the money considering the country’s economy was already challenges, with growth subdued for years while government finances struggled with the volatility of transfers from the Southern African Customs Union, among several economic factors. The balance of payment of a country is the difference between all money flowing into the country in a particular period of time and its outflow to the rest of the world through transactions made by individuals, companies and government entities.

Finance minister, Thabo Sophonea, has noted that government sought assistance through the Rapid Credit Facility (RCF) and the Rapid Financing Instrument (RFI) to support eminent balance of payments disparities and address economic challenges brought by COVID-19 – increasing despite measures that have been announced and are being implemented to soften the impact on the economy and wellbeing of citizens. He said Lesotho was no exception to the adverse impacts that COVID-19 leaves on economies.

“The challenges on the global supply chain as well as constraints on demand have introduced significant vulnerabilities on the economy and the outlook. Real GDP growth is expected to fall by around 3.3 percent in 2020/21 due to lower external demand, supply side shocks, a sharp fall in remittances and a decline in the performance of the key sectors that support growth, and significant loss of jobs. These include textile and manufacturing industry production and mining sector, construction sector and services sector.

“The COVID-19 situation has put extreme pressure on the already fragile level of reserves that are required to sustain the peg between the Loti and the Rand per the Common Monetary Area (CMA) agreement between South Africa, Namibia, eSwatini and Lesotho, and, therefore, called for the need to acquire Balance of Payments (BOP) support, as a precautionary measure to anchor the value of the Loti against the Rand and preserve the purchasing power of the local currency,” he said.