The Executive Board of the International Monetary Fund (IMF) today completed the second and third reviews of the Kingdom of Lesotho’s economic performance under a program supported by the Extended Credit Facility (ECF) arrangement. The Board also approved an augmentation of access equal to 25 percent of quota, which would lead to a total access of 145 percent of quota, an amount equivalent to SDR 50.605 million (about US$77.84 million), under the ECF arrangement. The Board’s decision will enable an immediate disbursement of an amount equivalent to SDR 20.085 million (US$30.89 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 33.565 million (US$51.63).
The three-year ECF arrangement for the Kingdom of Lesotho in an amount of SDR 41.9 million was approved by the IMF’s Executive Board on June 2, 2010 (see Press Release No. 10/224).
Following the Executive Board’s discussion on Lesotho, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:
“Lesotho’s economy has performed well under the ECF-supported program, notwithstanding a sharp reduction in SACU revenues, devastating floods, and high international commodity prices. Stronger fiscal adjustment efforts and an acceleration of structural reforms are now needed to restore fiscal and external sustainability and pave the way for sustained economic growth and poverty reduction. The augmentation of access under the ECF-supported program, supplemented by donor assistance, will further support the authorities’ reform agenda and cushion the impact of the shocks on the balance of payments.
“Given the desirability of maintaining the exchange rate peg, the authorities’ medium-term economic program appropriately focuses on fiscal adjustments to rebuild international reserves. The prudent fiscal stance for 2012/13, with emphasis on curbing recurrent expenditures while protecting social spending, is an important step in this direction. The efficiency of spending will also be enhanced by improvements in public financial management and the quality of capital spending, while strengthening tax administration will help the achievement of the authorities’ medium-term fiscal targets.
“The authorities are committed to accelerating structural reforms to support private sector-led growth and economic diversification. These reforms are aimed at improving the business climate and boosting external competitiveness.
“Lesotho’s financial system has remained resilient, and planned regulatory reforms will further strengthen the sector and facilitate financial deepening. Key measures include adopting regulations for the recently enacted Financial Institutions Act, reinforcing the supervisory role of the central bank and broadening access to financial services, especially in the rural areas,” Mr. Zhu added.