THE Portfolio Committee on the Economic and Development Cluster is concerned about government ministries and departments’ inability to collect revenue, though their recurrent budgets are always high.
business
March 20, 2023
NEO SENOKO
3 min read
Committee concerned about govt inability to collect revenue
Minister of Finance, Dr Retšelisitsoe Matlanyane
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The approved total expenditure for the same year was M23.4 billion
To finance the deficit, the government had to resort to both domestic and external borrowing
The committee raised these concerns in a detailed report following the announcement of the budget allocations for the financial year 2023/24 by the Minister of Finance and Development Planning Dr Retšelitsitsoe Matlanyane recently.
In her presentation, the Minister said the financial year 2022/23, Parliament approved a total revenue of M19.9 billion.
This amount comprised M9.5 billion from tax revenue, grants of M2.3 billion, non-tax revenue of M2.6 billion, and SACU revenue of M5.4 billion.
The approved total expenditure for the same year was M23.4 billion. Of the total approved expenditure, M16.3 billion was for recurrent spending, while M6.7 billion was allocated for investment spending.
The approved budget had projected a fiscal deficit of M3.3 billion which is equivalent to 7.7 percent of GDP.
According to the committee, the 7.7 percent deficit is much higher than the recommended 3 percent of deficit by the International Monetary Fund (IMF) and the World Bank or International Standards.
To finance the deficit, the government had to resort to both domestic and external borrowing, which leaves the country in debt.
“Recently, the Central Bank of Lesotho (CBL) borrowed around M900 million in the form of treasury bonds to finance the arrears caused by excessive spending by ministries and departments. At the same time, high indebtedness compromises the country’s standing with international organisations such as the International Monetary Fund and the World Bank,” the Portfolio Committee on the Economic and Development Cluster revealed in a report.
All in all, the country’s total debt has reached 60 percent of its GDP.
Matlanyane said the estimated total government debt stands at M22.2 billion, an increase of M3 billion from the previous financial year.
Domestic debt stock stands at 19.4 percent of the total public debt stock, while foreign currency-denominated debt is M77.7 percent of the total debt.
In 2022/23, the government contracted a new debt of M873.6 million from domestic money and capital markets.
During her midterm budget review of the 2022/23 speech, the Minister said the stock comprised domestic debt of M4.6 billion and external debt worth M17.6 billion.
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The major drivers of debt were losses from local currency depreciation, which contributed around a 12 percent increase to total debt as well as a new borrowing from the domestic market with a 5 percent contribution.
The committee largely attributes the country’s debt to the ministries' inability to meet their revenue targets while enjoying huge expenditure budgets, and at the same time creating high fiscal deficits.
The other issue of note, according to the committee is the accumulation of arrears, where government ministries fail to pay suppliers on time. It is noted that they normally pay their arrears in the next financial year or not at all.
“The committee applauds the Ministry of Finance and Development Planning for introducing Bills that are aimed at raising revenue and working with development partners such as the World Bank to increase capacity for budgeting, accounting, procurement, and internal audits, including at the local level to settle the ground for deeper fiscal decentralisation,” the committee also said.
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