By Seleoe Nonyane
The minister of finance and development planning, Dr Retṧelisitsoe Matlanyane, says the 2022/23 budget was prepared by the last administration against a challenging economic and fiscal situation.
Matlanyane said this while reflecting on the objectives of the budget, as she tabled the 2022/23 midterm review budget in the National Assembly last week.
She noted that the economy had suffered several shocks and that while recovering from COVID 19, the country received heavy rains that affected agricultural output and destroyed key infrastructure, adding that all these were compounded by the effects of Russia – Ukraine conflict which were felt through high prices of food and fuel in particular.
“The intention nevertheless was to continue to implement the National Strategic Development Plan II and take major strides; to recover and steer the economy to be private sector-led and build resilience. Fiscal consolidation was the bedrock of attaining macro-fiscal stability; and rebuild infrastructure that was damaged by heavy rains.
“The budget was also aimed at identifying and filling critical skills gaps within the health sector to facilitate a resilient and responsive Health system, enhancing productive capacity of the key sectors; as well as consolidating efforts for good governance through the national reform programme as an anchor for peace, stability and justice for all. The implementation of several programmes had to be restrained for various reasons.
The minister went on to state that the high integration of Lesotho’s economy with South Africa implies increased exposure to external shocks and that, as a result, domestic economic recovery in the remaining half of 2022/23 hinges on economic developments in South Africa and the global economic developments which affect it directly.
In addition, prolonged conflict in Ukraine has caused economic pressures on multiple fronts, most notably an increase in global inflation as commodity prices continue to rise.
“Also, the risk of tighter global financial conditions, labour shortages and rising cost of living may pose a challenge to the South African economic recovery efforts and consequently adversely affect Lesotho’s recovery path.
“Domestic growth is projected to average 2.3 percent by the end of 2022/23 and expand further to 2.7 percent in 2023/24 before averaging 4.0 percent between 2024/25 and 2025/26. The positive outlook is expected to be supported by continued activities of the Lesotho Highlands Water Project (LHWP) II dam construction together with sizable investments in climate smart agriculture by the Millennium Challenge Corporation (MCC) II and Smallholder Agriculture Development Project (SADP) II.
“In September 2022, the key sources of domestic inflationary pressures came from elevated food and fuel prices. During this period, food and fuel inflation registered 10.2 percent and 14.5 percent respectively. Annual headline inflation accelerated to 9.2 percent in September from 5.4 percent observed in the same month of 2021. As a consequence, these price developments have broadly increased the cost of living for most households.” Matlanyane said.
She went on to reveal that the government’s medium-term priority is to implement economic reforms by, among others, increasing inclusive and sustainable economic growth and through enhance private sector participation in production and job creation; strengthening human capital development as well as enhancing transparency and accountability of public institutions; promoting regional collaboration to ensure resilient infrastructure development and renewable energy generation and accelerating and implementing the necessary reforms to buttress stability.
Matlanyane emphasised that through these and other measures the government will further improve policy certainty and investors’ confidence, thus strengthening the resilience of the economy and indeed making Lesotho an attractive investment destination.
