Fourth Review Under the Three-Year Arrangement Under the Extended Credit Facility, Request for Waiver of Nonobservance of Performance Criterion, and Request for Modification of performance criteria—Informational Annex
Author: International Monetary Fund. African Dept.
Publication Date:
04 Dec 2012
eISBN:
9781475585384
Language:
English
Keywords:
ISCR; CR; government; SDR; development spending; post control audit function; Jmap bank-fund Matrix; function in customs; control audit function in customs; Risk-based supervision; Internal audit
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Lesotho’s economic growth has weakened compared with the earlier forecast, owing to adverse exogenous shocks. In 2011/12, despite weather-related shocks (floods), robust growth was maintained. To address these shocks, the authorities have sought external assistance. Lesotho continued to face the challenges in rebuilding its international reserve cushion. The authorities continued commitment to implement reforms in improving the business climate to support private sector-led growth and economic diversification. The authorities have also requested a waiver for the missed cumulative quantitative performance.

Abstract

Lesotho’s economic growth has weakened compared with the earlier forecast, owing to adverse exogenous shocks. In 2011/12, despite weather-related shocks (floods), robust growth was maintained. To address these shocks, the authorities have sought external assistance. Lesotho continued to face the challenges in rebuilding its international reserve cushion. The authorities continued commitment to implement reforms in improving the business climate to support private sector-led growth and economic diversification. The authorities have also requested a waiver for the missed cumulative quantitative performance.

Relations with the Fund

As of September 30, 2012

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:

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III. SDR department:

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IV. Outstanding purchases and loans:

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V. Financial arrangements:

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

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Formerly PRGF.

VII. Safeguards assessment

An update safeguards assessment has been conducted in connection with the augmentation of the ECF arrangement. The CBL has made progress in strengthening safeguards since the 2010 assessment, but certain risks remain. Deloitte (South Africa) was appointed as external auditor for three years in 2010, and completed the 2010 and 2011 audits within three months. Aspects of the monetary data reporting process have been strengthened with Fund’s technical assistance. However, the recommended internal audits of the monetary data provided for the test dates have not been completed. The assessment learned that a foreign loan contracted in January 2011 resulted in the breach of the program’s performance criterion for new non-concessional borrowing. The loan was repaid in full in May 2011, but the process by which this loan was contracted raises concerns over governance and transparency. The authorities are taking steps to address these issues. In this context, audit oversight and internal audit remain areas where improvements are needed to strengthen overall governance and accountability at the CBL.

VIII. Exchange arrangement:

Lesotho is a member of the Common Monetary Area (CMA) and the Lesotho loti is both de facto and de jure pegged at par to the South African Rand, which is also legal tender in the country. Lesotho has accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Articles of Agreement and maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions. As of August 31, 2012, the maloti rate per U.S. dollar was M.8.41.

IX. Article IV consultation:

The 2012 Article IV consultation was concluded by the Executive Board on April 9, 2012. Lesotho is on the standard 24-month Article IV consultation cycle.

X. Technical assistance missions:

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XI. Resident Representatives: The new IMF resident representative office in Maseru headed by Mr. Michael Tharkur was opened in May 2012

Lesotho: The Jmap Bank-Fund Matrix

(As of September 28, 2012)

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Cover IMF Staff Country Reports
Kingdom of Lesotho: Fourth Review Under the Three-Year Arrangement Under the Extended Credit Facility, Request for Waiver of Nonobservance of Performance Criterion, and Request for Modification of Performance Criteria
Author: International Monetary Fund. African Dept.
Volume/Issue:
Volume 2012: Issue 322
Publisher:
International Monetary Fund
ISBN:
9781475585384
ISSN:
1934-7685
Pages:
54
DOI:
https://doi.org/10.5089/9781475585384.002