Majoro seeks developing countries’ debt deletion

Less than a month after parly decries escalating M19b debt

MATHATISI SEBUSI

MASERU – Prime Minister Moeketsi Majoro has appealed to international creditors to reconsider global debt deals for the developing world, underlining the vital need for decisive action to provide substantive debt relief to developing countries to free up sorely needed resources to respond to the raging COVID-19 pandemic.

Majoro has called for outright cancellation of debts of countries that are severely affected by the pandemic and provision of additional resources to support their economic growth.

This he said during the virtual special segment of a United Nations (UN) 2021 Forum on Financing for Development Follow up.

Majoro said due to COVID-19, countries’ economic growth has slowed down, personal savings has depleted and national debt levels have increased.

He indicated that Lesotho would, therefore, like to encourage all commercial and private international creditors to take bolder action to suspend debt repayments and apply debt cancellation.

“As we are all aware, the negative impact of the COVID-19 pandemic on countries’ socio-economic balance sheets is of an unprecedented magnitude.

It has slowed down economic growth, depleted personal savings, disrupted daily livelihood pursuits, raised national debt levels, and increased costs of health care, amongst others. At the global level, the pandemic has reversed the gains made on sustainable development goals,” he said.

He pointed out that debt relief process remains an unfinished business pointing out that countries that received relief earlier have relapsed due to the unavoidable need to provide infrastructure amid lack of additional resources for that purpose.

Majoro said countries from the previous round, including Zimbabwe and Sudan, must still be considered for debt relief as they are among the struggling ones. He further noted that as the impacts of COVID-19 have piled up on top of the effects of climate change as well as inadequate infrastructure, and that “it is critically important that the donor community further increases its level of official development assistance until when poverty has been eliminated.”

He further echoed the call for more Foreign Direct Investment (FDI) to support trade capacity, employment and growth. This, after the pandemic driven sluggishness of demand as well as supply side disruptions due to lockdowns and cross border restrictions have trashed industry everywhere.

“As economies reopen and demand picks up in the productive sectors, investments in a diverse array of ventures are desperately needed, I would like to call for more action from our partners,” he added.

The 2021 session was focused on, among other things, providing an inclusive platform to advance an action-oriented dialogue on the solutions on financing the COVID-19 recovery and sustainable development on the path to 2030.

The event, which ended on Thursday, touched on topics that include domestic public resources, debt and debt sustainability, international trade engine development, domestic and international private business and finance as well as other cross cutting issues.

It brought together heads of state and government, ministers and high level government officials as well as senior officials of international organisations.

Lesotho is currently part of countries with an escalating debt of M19 billion this year, a state that has left the parliamentary Portfolio Committee on the Economic and Development Cluster worried. The committee even warned the government should desist from borrowing more money without parliament’s approval.

The Lesotho government mainly borrows money for, among other reasons, finance of budget deficit which results when government spending exceeds revenue.

Presenting financial estimates for the year 2021/2022 in February, finance minister Thabo Sofonea, indicated that developments in revenue and expenditure will result in the overall fiscal deficit ballooning to 13.1 percent in 2021/2022.

Sofonea said the fiscal imbalances were unsustainable and exerted a considerable pressure on the country’s international reserves which he said needed to be maintained at an adequate level to preserve the peg.

They further said they also imposed downside risks to the public debt “which is currently moderate and may result in distasteful debt distress.”

On Tuesday this week, the parliament’s portfolio committee said with all the measures and policies to be put in place in order to increase the collection of revenue and limit expenditure, the Ministry of Finance might need the budget support from the World Bank in order to finance the deficit that Lesotho is facing.

“The Committee is very concerned about the issue of escalating public debt and recommends that parliament needs to be consulted prior to the country getting into any public debt,” reads the committee’s report.

Public Eye reported on March 19 that, according to the report of the Auditor General on the consolidated financial statements of the government for the year ended March 31, 2019, the country’s outstanding debt amounted to over M15 billion as at March 2019. External debt accounted for most of the total debt, 79.78 percent, and was largely owed to multilateral creditors.

“External debt stock amounted to M12.662 billion as at March 31, 2019, after taking into consideration exchange rates as of that date,” Monica Besetsa, acting Auditor General, stated in the report which was published last month. Besetsa said the outstanding domestic debt as at March 31, 2019, was M3.209 billion.

The total public debt has since escalated by about M3.729 billion from M15.871 billion in 2019 to M19.6 billion this year.

“Mr Speaker, the total public and publicly guaranteed debt stood at M19.6 billion at the end of January 2021, with the external debt reaching M15.1 billion and domestic debt standing at M4.5 billion,” Sofonea told parliament in February.

He said the Debt Sustainability Assessment (DSA) had highlighted the rapid increase in the country’s debt levels over the past three years, particularly on the domestic side driven mainly by the persistent budgets deficits.

He said the main driver of debt on the external side had been the consistent depreciation of the local currency, loti, against the major external currencies in Lesotho’s debt portfolio such as the US dollar, the British pound sterling and the euro including the basket of currencies such as the Special Drawing Rights.

“Therefore, the recent DSA assesses Lesotho’s risk of overall and external debt distress at moderate level despite the impact of COVID-19 shock but risks to debt sustainability have risen,” he said.