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M993m loan burden on Lesotho

…As Lesotho fails to implement loan funded projects thus receiving penalties

Lerato Matheka

Lesotho’s development tendency of lack of urgency has plunged the country into a M993 million loan interest burden.

The country has failed to utilise loans granted towards development which has resulted in an increased cost of M993 million from the initial M368 million of debt servicing.

In every budget speech of the parliament, the Finance Ministry always highlights the priorities of the government for each financial year, and in the same manner, in 2017/18 financial year, there were priorities mostly which were developmental in nature.

The ministries of agriculture, Trade and Industry, Communications, Works, Energy, Tourism, Local government, Mining, Small Business Development and water were to implement such priorities but the 2018 audit report has recorded failure towards implementation.

“I have noted with dismay low budget execution in relation to those ministries ranging from 12% to 79% which could be attributed to a lot of laxity on the part of the implementing ministries and departments,” the Auditor General Lucy Liphafa remarked noting it was worth mentioning that more than 50% of the total budget in respect to the above mentioned ministries was allocated to development budget, “…yet not much has been done by the concerned ministries.”

Both the Accountant- General (AG), Hlompho Matsoso, and the Auditor-General, have raised concerns towards Lesotho’s poor development implementation urgency.

“In my previous reports I had raised concerns on the low performance of the ministries in the implementation of development projects, giving due regard to the importance of the development projects for the betterment of the welfare and livelihood of the citizens. This was further emphasised by the Honourable Minister of Finance in the budget speech to Parliament for the 2017/2018 fiscal year, where he stated that the implementation of the capital projects continue to lag,” Liphafa said.

She added that the Accountant- General’s comments on the 2017/2018 consolidated Financial Statements, indicated that there was an execution rate of 58% on development expenditure.

She further stated that the implementation rate for the three funding categories were 65%, 57% and 33% in respect to domestic resources, grants and loan funded expenditure respectively.

“It is very disturbing to note an implementation rate of 33% on the loan funded projects, on which the government incurs huge costs to service such loans. This is attested by the Accountant-General’s comment where she indicated that over a seven-year-period, from 2011/2012 financial year, the loan stock has increased by 81 percent and that annual debt servicing cost has more than doubled from M368 million to M993 million,” Liphafa said stressing that the 2017/18 budget speech indicated that road and aviation infrastructure is the backbone that connects both remote and urban areas of the country and that it improves access to service delivery centres and enhances socio-economic development.

As such, it is very disturbing for the ministry of public works to have only expended 59% of the allocated funds, yet good road infrastructure may be considered a requirement for implementation for the majority of the capital   projects taking into account the topography of the country,” the Auditor General said.

She indicated that during the year under review, it was observed that out of the 16 projects approved, only one project was not implemented, while slow implementation and other anomalies were noted on six projects of Rural Roads Improvement, Integrated Transport Project, New State House Design, Footbridges, Tele-Aliwyn’s Kop and Transport Infrastructure Connectivity Project ranging from 7% to 39%.

“According to the Consolidated Financial Statements, a total of M562, 238, 682 was incurred in capital expenditure. However, I have noted that a total amount of M18, 949, 482 under Rural Roads Infrastructure was omitted in the financial statement,” Liphafa remarked noting the omitted was in respect of the Makeneng-Khatibe, Holy Cross-Polane Section A and B, Siloe-Qhomane Section A and Nyakosoba-Mofoqohi.

She indicated that the budget for upgrading roads in various districts was approved and awarded to contractors, but scrutiny of the Ministry of Public Works records revealed that some of the projects experienced slow progress whilst others had been suspended due to lack of fund and the end of the 2017/18 financial year and the situation remained the same.

Liphafa highlighted the delay of developmental improvement of the Moshoeshoe I International Airport, citing in order to comply with the international Civil Aviation Organisation standards and to provide for growth in the aviation industry, the government decided to rehabilitate the airport from the 2017/18 financial year.

“The project was to be financed by both the Lesotho government and various donors to the tune of M76, 750, 000. I have noted that at the end of the 2017/18 financial year, no process was made for the rehabilitation of the airport.

“The explanation obtained was that some of the donors withdrew due to non-compliance to technical standards for safety and operating procedures at the airport as required by the international agreements. This calls for concern on the part of government due to negative impact on the aviation industry. For a considerable time, the airport will not be able to accommodate bigger airlines that can improve economic growth of the country,” she said.

The 2018 debt reached 44.53% of Lesotho’s GDP, a 7.42 percentage point rise from 2017, when it was 37.11% of GDP.

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