Government is broke

Government is broke

MASERU – THE government’s finances are in a terrible state with gaping holes that are threatening to derail its projects, thepost can reveal.
It might even fail to meet its obligations.
And the government is laying the blame squarely on the previous administration which it accuses of profligacy and poor financial management.

thepost understands that Finance Minister Dr Moeketsi Majoro briefed a “stunned” Cabinet on the poor state of the government’s finances on Tuesday.
Sources told this paper that Majoro revealed that government coffers were running dry and there is need for urgent intervention to avoid disaster.
Majoro is understood to have told his colleagues that the finance ministry noticed that things were going haywire in the third quarter of last year when it became clear that the Lesotho Revenue Authority (LRA) was going to miss its target.

The source said Majoro painted a bleak picture of a country in the throes of a financial crisis caused by the decisions of the previous financial administration.
He said Majoro said as the government reserves depleted it started rationing cash to ministries. The result was that the ministry stopped paying suppliers.
The source said Majoro revealed that there is nearly M800 million which is hanging in the government’s payment system because there is no money to pay suppliers.
Those areas have been brought into the current financial year, pushing the country further into financial trouble.
The source said the finance minister warned that those arrears might soon affect businesses and commercial banks.
Another source told thepost that Majoro portrayed a picture of a country that is now living from hand-to-mouth as its tax revenues shrink and remittances from the Southern African Customers Union slide.

The source said the minister said he was worried that Lesotho’s Net International Reserves had dipped to dangerous levels as the government continued to rely on them to meet immediate financial obligations. Lesotho has to maintain certain levels of foreign reserves for its currency to remain at par with the South African Rand.

Majoro, the source said, revealed that former Prime Minister Pakalitha Mosisili’s government burned through a staggering M2.3 billion of reserves in just nine months.
Those reserves had been accumulated between 2012 and 2015. The government’s balances with the Central Bank of Lesotho have dropped dramatically since 2015. The biggest drop was in 2016.
“The reserves are almost gone. The level of profligacy is shocking,” said the source privy to the details.

He said Majoro also revealed that the bulk of the money from the reserves was used to finance Bidvest’s Fleet management deal.
“We now know that the Bidvest deal was a disaster. We are only discovering that the real cost of that deal is not what we were told,” the source said.
“The actual amount is almost double what the public had been told during the deal.”

thepost was told that Majoro is preparing to call a press conference to announce the state of the government finances.
That press conference will be held either today or early next week, according to several sources.
Last night Majoro said he could not say much until he calls a press conference.
He flatly refused to discuss the issue.

thepost understands that Majoro is likely to propose a raft of measures to avert a crisis. It is understood that he will suggest a cut on international travels and travel allowances.
He is also said to be toying around with a plan to freeze government hiring altogether.
There could also be more sin taxes and an adjustment on the fuel levy.

In his budget statement in February Majoro suggested a set of austerity measures after warning of the trouble ahead.
Majoro said Net International Reserves had dropped to a “dangerous level of about 3½ months of imports riding on underperformance of revenues and subsequent depletion of government deposits”.

He said SACU revenue for 2018/19 financial year had declined by M616.1 million from its 2017/18 level.
“In real terms, this means that government would need nearly a billion maloti to cover the same programmes,” he said.
Government hired Bidvest to provide vehicle on a short-term contract after firing Avis. Although the government accused Avis of gouging exorbitant fees and penalties the Bidvest arrangement was worse in terms of cost.

Touted as a stopgap measure, the controversial contract ended up dragging for nearly two years. To finance it the government had to dip into its reserves.
Between October 2015 and March 2016 the government paid M261 million to Bidvest, nearly M100 million what it had paid Avis for the whole year.
That means the government was paying the company M43.5 million per month. Given that the contract lasted 19 months the government could have easily paid M826 million to the South African company. That is almost the same that it paid to Avis for five years.

Staff Reporter

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