THE economic contractions in the country together with lesser Southern African Customs Union (SACU) revenue are worsening Lesotho’s already poor external and fiscal positions.

In his 2022/23 budget speech presented to the media last week, the Minister of Finance, Thabo Sofonea said both the COVID-19 pandemic and flooding had instigated extensive social and economic disturbance, deeply impacting many key sectors.

He said consistent with projected GDP growth of 2.3 percent and inflation rate of five percent, SACU revenue was projected to fall below last year’s collection by M608 million and total M5.4 billion.

In total, revenue collection including SACU and grants is projected at M19.7 billion.

Tax revenue will reach M9.5 billion, grants will average M2.3 billion while non-tax revenue is estimated at 13 percent of the total revenue of M2.6 billion. 

“It is at this juncture that I call for a major fiscal consolidation for the next few years,” Mr Sofonea said. “This policy intervention will have to consist of revenue enhancement measures and containing expenditure so as to create adequate fiscal space for future financing investments in jobs, while at the same time ensuring enough foreign reserve shield against likely domestic and external shocks. In the absence of fiscal consolidation, the government risks massive drawdown of deposits for the next fiscal year.”  

At the same time, expenditure is projected to cover 53.9 percent of GDP at M23 billion. Recurrent expenditure is projected at M16.3 billion while capital budget is expected to make up 18 percent of GDP, which is about M6.8 billion.

“The outcome of the said outlays will result into net borrowing of M3.3 billion which is estimated to account for 7.7 percent of GDP,” said the minister.