THE International Monetary Fund (IMF) has recommended the government of Lesotho to reduce its public sector wage bill as one of the measures of containing its huge spending.
This move has dealt Lesotho’s civil servants a major blow in their quest to arm-twist the government into awarding them a massive 25 percent salary hike.
This literally means that should government do as recommended, the hopes of teachers, nurses, police officers and other public servants who are pressuring the authorities to increase their salaries by 25 percent in this current financial year.
For the 2022/2023 financial which started on 1 April the civil servants were only awarded a five percent hike. Two weeks ago they flatly rejected the five percent offer and threatened to embark on a series of protests meant to force government to give into their demands of 23 percent.
They even threatened to vote against government come October elections should their demands not be met. In its statement released over the weekend following consultations between the government and the IMF board of Directors it was advised that there was need to contain spending.
“The IMF Directors have emphasized the need for a growth-friendly fiscal consolidation to reduce imbalances, rein in public debt, and rebuild policy space,” the IMF statement read.
“They called for measures to contain current spending, including the public sector wage bill, reprioritise social spending to focus on the most vulnerable, and rationalise capital spending.
“Directors agreed that fiscal adjustment should be complemented by reforms to public financial management (PFM) and revenue and tax administration. They encouraged the authorities to finalise and submit the Public Financial Management and Accountability Bill to Parliament and implement regulations to improve the budget process and minimise arrears.
“Directors concurred that monetary policy should focus on price stability and maintaining adequate reserves to safeguard the exchange rate peg. They encouraged the authorities to strengthen central bank independence and coordinate closely across institutions on fiscal and monetary policies for credible and effective macroeconomic management,” the IMF said.
The Fund noted that since 2020, Lesotho had been adversely affected by a host of challenges including the Covid-19 induced slump in economic activity, declining revenues from the Southern African Customs Union (SACU) and the impact of Russia’s war with Ukraine which has resulted in price hikes of most basic commodities.
“Despite a swift response by the authorities, the fallout from the pandemic—including delays to large infrastructure projects, supply chain disruptions, layoffs in the textiles sector, and weak external demand—has weighed on social and economic development, amplifying legacy structural challenges.
“Growth has been revised down to 2, 1 percent in the 2021/22 financial year after contracting by six percent in the 2020/21 financial year, and is forecast at 2, 7 percent in the 2022/23 financial year and 1, 4 percent on average thereafter. The war in Ukraine has hindered food imports, exacerbating agricultural disruptions due to floods and the pandemic. Global price increases in food and fuel, which account for over half of the consumer basket, are hurting the vulnerable, with inflation expected to reach 6, 8 percent in the 2022/23 financial year.
“Fiscal performance was better than expected in the 2020/21 financial year. However, public expenditure has continued to increase, with the recent decline in SACU transfers weakening the external position. Recent cases have highlighted gaps in public financial management and efforts to restrain expenditure have been undermined by growing domestic arrears, as spending pressures mount ahead of the autumn 2022 elections,” the IMF said.
