Maseru -Lesotho’s continued unbridled spending during lean years could breed adverse consequences likely to plunge the economy into deeper problems, Finance Minister, Dr Moeketsi Majoro has warned. Unchecked spending, he said this week, would consequently leave future generations with a heavy debt burden that could stall economic growth and spread national poverty.
Majoro told local media government should curb spending, and unless tough measures are taken to bring controls in government expenditure, the persistent budget deficit would soon spiral out of control. “We have to start to think of policy measures that will ensure that government actually spends what it can afford to raise, otherwise we may fall into the same trap as other countries which are already experiencing the same problems,” he said, adding that with the traditional sources of revenue such as SACU receipts dwindling, there was urgent need to find alternative means to expand its revenue sources.
He further said with the current economic challenges which are only likely to realise good results at the turn of the of the 2019-2022 fiscal years when the activities of Phase II of the Lesotho Highlands Water Project reach their peak, some of the government’s programmes would be very difficult to realise. More measures need to be put in place over and above what the government had already introduced during the current financial year which included degrading official government international flight trips from first class to business class and de-commissioning the high consuming vehicle fleet for cabinet and other officials, he added.
Majoro even gave an example that even with some of the proposals being mooted for increasing the salaries of Members of Parliament and people in similar positions would not be feasible considering the commitments that the government is targeting, such as the delayed six percent salary adjustment for the police, estimated at over M50 million, as well as the reported back payments the government owes teachers.
While hailing government efforts to cut spending, local economists have warned the finance minister on his policy vision, saying unless there is genuine political will and legislative framework attached to the policy, it will not be easy to implement. “The government of Lesotho has adopted an accrual budget in an attempt to align expenditure planning to resources requirements over time, which included an initiative to move towards the Medium-Term Budget Framework. However, this has proven to be a challenge in the recent past given the unstable and diminishing financial resources.
“Consequently, it becomes imperative to adopt cash budgeting with a view to aligning expenditure planning to the projected cash flows. This, therefore, necessitates approval of cash management in order to be in a position to deal with cashflow shortages, and prioritise within the statutory obligations,” said one local critic calling on a more solid commitment for the policy to be attained.
Critics further said while cash management is concerned with mobilisation, collection, disbursement and management of cash to maintain the requisite liquidity, this would help in providing a clear picture of all the expected cash flows, thereby enabling the treasury to plan their expenditure accordingly.
“Revenue and expenditure (as well as borrowing constraints) are considered together to determine annual budget targets. Cash rationing delivers an obvious and immediate benefit in that it ensures that expenditure matches forecast income and that deficits are strictly controlled,” the critic, who refused to be identified, further explained.
However, they also point at the underlying challenges in cash management in that revenue inflows and payment obligations generally do not match in any period. One of the challenges for countries operating cash-rationing is the accumulation of arrears. This, particularly needs discipline by those in management of government finances, critics argue.
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