Journal Issue

Kingdom of Lesotho: Staff Report for the 2008 Article IV Consultation—Informational Annex

International Monetary Fund
Published Date:
January 2010
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I. Lesotho: Relations with the Fund

I. Membership status: Joined 07/25/1968; accepted the obligations of Article VIII, Sections 2, 3, and 4: 03/05/1997.

II. General resources account:

SDR MillionPercent Quota
Fund holdings of currency31.3289.75
Reserve position in Fund3.6110.35

III. SDR Department:

SDR MillionPercent Allocation
Net cumulative allocation3.74100.00

IV. Outstanding purchases and loans:

SDR MillionPercent Quota
PRGF arrangements20.6559.17

V. Financial arrangements:

TypeApproval DateExpiration DateAmount Approved (SDR Million)Amount Drawn (SDR Million)

VI. Projected obligations to fund (SDR million; based on existing use of resources and present holdings of SDRs):


VII. Under the Fund’s safeguards assessment policy, the CBL was subject to a safeguards assessment with respect to PRGF arrangement approved on March 09, 2001. The assessment, completed on July 24, 2003, found that while the bank has made notable progress in strengthening its safeguards since the off-site assessment in July 2001, vulnerabilities remain, in particular in the areas of internal audit and internal controls.

VIII. Exchange arrangement: Lesotho’s currency, the loti (plural maloti), is pegged to the South African rand at par. The CBL deals with commercial banks mainly in South African rand. As of December 23, 2008, the rand (maloti) rate per U.S. dollar was M 9.74.

IX. Article IV consultation:

The 2007 Article IV consultation was concluded by the Executive Board on November 14, 2007. Lesotho is on the standard 12-month Article IV consultation cycle.

IX. Technical assistance missions:

Monetary policy implementationMAEshort-term2001
Public accountsFADshort-term2002
General Data Dissemination System (GDDS) project for Anglophone AfricaSTAshort-term2002
Balance of paymentsSTAshort-term2002
Monetary policy and AML/CFTMFDshort-term2003
Government finance statisticsSTAshort-term2003
National accountsSTAshort-term2003
National accounts statisticsSTAshort-term2004
GDDS project for Anglophone AfricaSTAshort-term2004
Legislative drafting/FIULEGShort-term2005
Monetary operations/payments issues/banking supervisionMFDshort-term2005
Government finance statistics/GDDSSTAshort-term2005
Banking lawLEGshort-term2005
National accounts statistics/GDDSSTAshort-term2005
Monetary operationsMFDshort-term2005
Payments issuesMFDshort-term2005
Banking lawLEGshort-term2005
BOP statistics/GDDSSTAshort-term2005
GDDS consultationSTAshort-term2005
Government Finance Statistics: GDDS Project for Anglophone African CountriesSTAshort-term2006
Payments System ReformLEGshort-term2006
Central Banking and Banking LawLEGshort-term2006
Bank Supervision/Monetary Operations/Payments & SettlementsMFDshort-term2006
Legal drafting, AML/CFT, FIU, supervisory and institutionalLEGshort-term2006
Regional workshop on the statistical treatment of SACU transfersSTAshort-term2007
Monetary and Financial StatisticsSTAshort-term2007
Nonbank supervisionMCMshort-term2007
Bank supervisionMCMshort-term2007
Monetary operations/Bank supervisionMCMshort-term2007
Payments systemsMCMshort-term2007
Government Finance Statistics: GDDS Project for Anglophone African CountriesSTAshort-term2008
Monetary operationsMCMshort-term2008
Legal drafting of the Financial Institutions ActLEGshort-term2008
Balance of paymentSTAshort-term2008
Monetary operations/Bank supervisionMCMshort-term2008
Missions planned for 2009
Bank supervisionMCMshort-term2009
Money marketMCMshort-term2009
National accountsSTAshort-term2009
Pension supervisionMCMshort-term2009

XI. Resident Representatives:

The Senior Resident Representative posted in South Africa has been covering Lesotho since January 2004.

II. Lesotho: The JMAP Bank-Fund Matrix

(As of December 15, 2008)

TitleProductsProvisional Timing of missionsExpected Delivery date
A. Mutual information on relevant work programs
Bank work program in next 12 months
  • CAS

  • ESW on Regional Trade and Integration

  • PRSC series of three operations

  • Private Sector competitiveness and Economic Diversification project

  • A series of policy notes supporting the authorities’ growth strategy.

  • July/August 2008

  • July 2008

  • August/September 2008

  • Ongoing regular missions

  • Ongoing

  • 2009

  • May 2008 for first release

  • Project effective

IMF work program in next 12 months
  • One-person, one-day staff visit

  • 2008 Article IV Consultation

  • IMF Working Paper on SACU growth performance and macroeconomic synchronization.

  • June–July 2008

  • Oct. 29–Nov. 11, 2008

  • N/A

  • N/A

  • Feb. 9, 2009

  • Forthcoming in 2009

B. Requests for work program inputs
Fund request to Bank
  • Growth diagnostic

  • Assisting the authorities with food strategy and scaling up agricultural yield (An agriculture team is planning to undertook an initial assessment of the sector and reviewed the scope of assistance/analysis needed).

  • On-going

  • August 2008

Bank request to Fund
  • Data and macro framework (including the underlying analytical model).

  • Ongoing

C. Agreements on joint products and missions
Joint products in next 12 monthsLow income debt sustainability analysisOct. 29–Nov. 11, 2008Feb. 9, 2009

III. Lesotho: Statistical Issues

The statistical database is adequate for surveillance, although there are some deficiencies in core surveillance data including national accounts balance of payments statistics, and socio-economic data required to monitor progress toward the MDGs.

As one of 22 countries participating in the GDDS Project for Anglophone African Countries (funded by the U.K. Department for International Development (DFID)), Lesotho has undertaken the GDDS as framework for the development of its national statistical system. GDDS metadata have been posted on the Fund’s Dissemination Standards Bulletin Board since August 2003 and were last updated—except national accounts—in the last quarter of 2007.

National accounts

Revised national accounts were released in November 2008 by the Bureau of Statistics of Lesotho (BSL). Technical assistance from the EU and DFID supported the revision and the rebasing of the GDP data from 1981 to 2007. Important new sources of data include the use of VAT records and the 2002/03 household budget survey. Annual current and constant price (2004) estimates of GDP by economic activity, expenditure and income data are compiled by the BSL. These estimates have been published on the BSL’s web site from 1998 through 2007. Other macroeconomic indicators, such as industrial production indices, are used to monitor developments during the year.

There is a need to improve and expand on the source data used for compiling national accounts. Although access to data from the VAT records has proved valuable in revising the national accounts, there is still a need for more detailed information on economic activities. Therefore, the business register kept by the BSL should be overhauled and updated accordingly.


Since November 2004, BSL produces a monthly consumer price index (CPI) that covers Maseru and ten other urban centers. While the index has a reference period of April 1997=100, the weights are still based on the 1994–95 HBS. In addition, a separate CPI is compiled and published for Maseru City. The 2002–03 HBS is yet to be used to derive new weights.

Government finance statistics

Data on government finance statistics are provided by the Ministry of Finance to AFR Department periodically, although timeliness of reports remains problematic. Current and capital expenditure would benefit from more disaggregated reporting, including for health and education; revenues should be classified according to the GFSM 2001; and the reporting lag for the functional breakdown of expenditure needs to be addressed. GFS should distinguish clearly between current and capital (project) grants and external loan disbursements.

A mission in 2004 assisted the authorities in implementing the reporting framework of GFSM 2001. The mission identified several shortcomings in the data. Underreporting of recurrent revenue and expenditure occurred as ministries net revenue against unreported expenditure. Reporting of acquisition of nonfinancial assets was incomplete as ministries do not fully report donor project outlays. These data were also insufficiently detailed to allow appropriate economic classifications.

A subsequent mission in March 2006 found that progress with the implementation of the previous missions’ recommendations had been impeded by lack of resources and high turnover of staff. More specifically, no progress has been observed in implementing the recommendation to expand the coverage of fiscal statistics to include extrabudgetary units of government, or in aligning the classification of transactions in the source accounting systems with GFSM 2001 classifications. A revision of the chart of accounts with the introduction of the Integrated Financial Management Information System has led to improvements in availability of source data.

A follow up mission in 2007 helped the authorities to improve both annual and high frequency data for budgetary accounts. It also assisted with the analysis of local government accounts and made recommendation on the inclusion of data on extra-budgetary units in data for central government. However, the timeliness of data for these entities does not match the timeliness of budgetary central government data. Therefore, recently submitted 2005–06 data for publication in the Government Finance Statistical Yearbook 2007 was limited to budgetary central government, with a commitment to submit data on the other government units when these become available. No high frequency data are reported for publication in the International Finance Statistics.

Monetary and financial statistics

Lesotho compiles monetary statistics based on the Standardized Report Forms, which provide improved classification and sectorization of the accounts, and began reporting these data to the Statistics Department (STA) in December 2004. Monthly data following this new presentation are disseminated in the International Finance Statistics Supplement.

Despite the progress achieved, the authorities need, in line with STA recommendations, to expand the institutional coverage of the other depository corporations sector and to value all financial instruments at market value. A monetary and financial statistics mission in September 2007 found that work had started on the inventory of all financial corporations (deposit-taking and others), and that it was expected that credit cooperatives would be fully covered in the other depository corporations survey in last quarter in 2008. The compilation of the other financial corporations’ survey is targeted for the first quarter in 2009.

Balance of payments and external debt

The CBL compiles quarterly balance of payments statistics, usually with a lag of three months. However, some timeliness issues remain in forwarding these data to the Fund.

A STA mission in mid-2002 found that the methodology underlying the compilation of the balance of payments data suffers from the use of outdated benchmark surveys and deterioration in the coverage and timeliness of some of data sources. The main recommendations of the mission were as follows:

  • It is urgent to resolve both the inadequate coverage and the delayed reporting of data on exports and imports of goods. The Department of Customs and Excise (DCE) does not provide data in a timely fashion. The CBL, therefore, generates its own estimates and there are significant differences between these estimates and DCE’s data. For example, CBL believes that DCE is underreporting total imports and has been adjusting the level of imports upward by 30 percent. There are also differences between the trade data compiled by the CBL and the BSL.

  • Closer cooperation and new statistical surveys are needed to improve the quality of data on exports and imports of services. Most of the data on exports of services are based on outdated benchmark estimates adjusted for movements in the consumer price index. Data available at the ministries and other organizations could also be of better use for estimates of balance of payments variables. Government ministries and the CBL should cooperate more and make better use of data sources in organizations like the Lesotho Highlands Development Authority, the Lesotho National Development Corporation, the South African Reserve Bank, and the Employment Bureau of South Africa.

A STA mission in July-August 2008 made several recommendations In general, the authorities need to strengthen their institutional capacity. The CBL should be given formal institutional responsibility for the compilation of balance of payments statistics. This work is currently undertaken by the CBL but there is no legislation or official decree that designates this responsibility. Together with other members of the Common Monetary Area, Lesotho’s authorities also need to consider measures to harmonize concepts, methodology, and data collection for regional balance of payments data.

Lesotho: Table of Common Indicators Required for Surveillance(As of December 31, 2008)
Date of latest observationDate receivedFrequency of Data 1/Frequency of Reporting 1/Frequency of Publication 1/
Exchange ratesDec. 2008Dec. 2008DMD
International reserve assets and reserve liabilities of the monetary authorities 2/Sep 2008Oct. 2008MQQ
Reserve/base moneySep. 2008Oct., 2008MQQ
Broad moneySep. 2008Oct., 2008MQQ
Central bank balance sheetSep. 2008Oct., 2008MQQ
Consolidated balance sheet of the banking systemSep. 2008Oct., 2008MQQ
Interest rates 3/Sep. 2008Oct., 2008MMM
Consumer price indexNov. 2008Oct. 2008MMM
Revenue, expenditure, balance and composition of financing 4/—general government 5/N/AN/AN/AN/AN/A
Revenue, expenditure, balance and composition of financing 4/—central governmentSep. 2008Oct. 2008MIQ
Stocks of central government and central government-guaranteed debt 6/Dec. 2007Oct. 2008MIQ
External current account balanceQ2 2008Oct. 2008QQQ
Exports and imports of goods and servicesQ2 2008Oct. 2008QQQ
GDP/GNP2007Oct 2008AAA
Gross external debtDec. 2007Oct. 2008MQQ
International investment position 7/Q1 2008Oct. 2008QQQ

Both market-based and officially-determined, including discount rates; money market rates; and rates on treasury bills, notes, and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I); and not available.

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates; money market rates; and rates on treasury bills, notes, and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I); and not available.

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

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