Matlanyane eyes Public Debt Management Bill

RETHABILE MOHONO

MASERU – Lesotho has introduced the Public Debt Management Bill, a legislative framework designed to manage a country’s public debt effectively.

The Bill was introduced by Dr. Retšelisitsoe Matlanyane, Minister of Finance and Development Planning, which she says signifies a crucial advancement in enhancing fiscal governance.

In the budget presentation earlier this year, Dr. Matlanyane reported that as of the end of January 2024, the total government debt was M22.9 billion, with M19.0 billion in external debt and M3.8 billion in domestic debt. The International Monetary Fund (IMF) says Lesotho’s risk of external and overall debt distress is considered “moderate”.

This Bill grants the government the power to borrow, repay, and secure loans in a systematic manner, contributing to effective management of public debt. Moreover, it requires the formation of debt management committees in parliament to supervise the nation’s borrowing.

The Bill is meant to ensure that financing needs and payment obligations of the government are met in a timely manner at the lowest possible cost and prudent level of risk over medium to long-term. It is meant to develop and deepen an efficient domestic financial market and support monetary policy objectives.

If passed into law, this Bill will equip the finance minister with the exclusive right to raise debt from both domestic and foreign markets on behalf of the government, while instructing the minister to consult and seek approval of the Cabinet when borrowing on behalf of the government.

Also in the context of public-private partnership initiatives, the bill permits the government to acquire debt for project financing purposes and specifies that borrowed funds must be placed in a designated account under the government’s name at the Central Bank of Lesotho (CBL).

Apart from that, the Bill proposes, among others, that the Public Debt Management Department within the Ministry of Finance shall be responsible for mobilisation of resources for financing the projects, budget deficit and for purposes of cash management; develop a medium-term debt management strategy and annual borrowing plans and also negotiate with creditors.

It also proposes that the Minister shall establish a Public Debt Management Committee which is to be made up of the Principal Secretary for Finance Ministry, Attorney-General, Accountant General, Budget Controller, Governor of the CBL, Director of Macroeconomic Policy and Management Department and the Director of Public Debt Management who will also be the Committee’s Secretary.

The Committee’s mandate includes reviewing and proposing the medium-term debt strategy to the minister, overseeing the implementation of debt management strategies, and coordinating all debt management activities.

Upon implementation, this legislation will result in the revocation of The Loans and Guarantees Act, 1967; The Loans (Statutory Bodies) Act, 1975; The Local Act Loans Act, 2001; The Local Loans (Government Treasury Securities) (Trading) Regulations, 2009, and the Local Loans (Government Treasury Securities) (Trading) Regulations, 2009.

Simultaneously, excessive debt can have a substantial effect on young people, women, and other marginalised communities by limiting the government’s capacity to deliver crucial services.

When a country is burdened with high debt, a larger portion of its budget is diverted to debt servicing, leaving fewer resources available for public services such as education, healthcare, and social welfare programmes. Reduced access to quality education and healthcare hampers their opportunities for economic advancement and overall well-being, perpetuating cycles of poverty and inequality.