MASERU – Lesotho’s total outstanding debt amounted to over M15 billion as at March 2019, according to the report of the auditor general on the consolidated financial statements of the government of Lesotho published this week. 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 March 31, 2019, after taking into consideration exchange rates as of that date,” Monica Besetsa, acting auditor general, stated in the report. “The repayments and interest charges were M588 million and M229 million respectively,” Besetsa added. This means in the year under review, government paid a total of M817 million towards servicing its external debt.
In the 2018/2019 financial year, Lesotho Revenue Authority (LRA) collected M6.9 billion, meaning out of every loti Basotho paid in tax, about 12 lisente went to repayments and interest charges on past external debts. Besetsa said the outstanding domestic debt as at March 31, 2019, was M3.209 billion.
“The minister of finance is also empowered by the loans and guarantees act, 1967 to raise loans internally for financing development projects,” she said. “Domestic debt comprises Treasury Bills, Fiscal Bills and Treasury Bonds issued by the Central Bank of Lesotho. Fiscal Bills and Treasury Bonds finances the fiscal deficit when the need arises while treasury Bills are used to mop up excess liquidity,” she added.
The acting auditor general explained that in his budget speech for the financial year 2018/2019, the Minister of Finance (then Dr Moeketsi Majoro who is now Prime Minister) indicated that Lesotho’s overall fiscal position remained weak for most of 2017/2018, with irregular spikes of shortages in cash and foreign reserves.
She said government revenue was projected to be M845.7 million below budget by the end of the fiscal year and the LRA was likely to miss its tax collection target by about M684.4 million.
“The fiscal deficit was estimated at 5.7 percent of Gross Domestic Product (DGP) up from the budgeted 4.8 percent. The outstanding debt at 31 March 2019 was M3.209 billion,” Besetsa said.
Lesotho’s total public debt increased to 38.8 percent of GDP in the financial year in the financial year 2017/2018 from 37.6 percent according to the joint bank-fund debt sustainability analysis of 2018.
The update was prepared jointly by the staff of the International Development Association (IDA) and the International Monetary Fund (IMF). IDA and IMF said the increase was observed in both domestic and external borrowing and was partially offset by growth in nominal GDP and appreciation of the South African rand.
“Lesotho’s risk of external debt distress has been revised from low in the 2017 Article IV to moderate, reflecting weaker GDP growth projections, expanded debt coverage, larger deficits, and the inclusion of large contingent liabilities,” the two organisations said.
They warned that the debt ratio could be unsustainable over time if not monitored carefully. For instance, they said, the stock of debt is set to increase to 45.3 per cent by 2020/2021. Lesotho’s public debt data covers the central government, the central bank, and the publicly-guaranteed debts for state-owned enterprises.