Kingdom of Lesotho
Technical Assistance Report-Government Finance Statistics
Author: International Monetary Fund. Statistics Dept.
Publication Date:
03 Oct 2018
eISBN:
9781484377406
Language:
English
Keywords:
ISCR; CR; financial statement; transaction; payment; statement of operation; BCG statement; TA mission; debt statistics; transactions in nonfinancial assets; accounts payable; expenditure transaction
Download PDF (1.1 MB)

This Technical Assistance Report discusses the findings and recommendations made by the IMF mission regarding compilation of Government Finance Statistics (GFS) in Lesotho. The IMF mission reviewed current compilation methods of GFS for the budgetary central government and found that there were significant accuracy, classification, coverage, and comprehensiveness issues that undermine the credibility of fiscal statistics currently compiled and disseminated. Currently compiled and disseminated GFS include a large and persistent statistical discrepancy. The statistical discrepancy averaged to about a third of total revenue in preliminary data for FY2016/17 and FY2017/18. The mission also identified and discussed with the staff of the Ministry of Finance a number of reasons that may partly explain the discrepancy.

Abstract

This Technical Assistance Report discusses the findings and recommendations made by the IMF mission regarding compilation of Government Finance Statistics (GFS) in Lesotho. The IMF mission reviewed current compilation methods of GFS for the budgetary central government and found that there were significant accuracy, classification, coverage, and comprehensiveness issues that undermine the credibility of fiscal statistics currently compiled and disseminated. Currently compiled and disseminated GFS include a large and persistent statistical discrepancy. The statistical discrepancy averaged to about a third of total revenue in preliminary data for FY2016/17 and FY2017/18. The mission also identified and discussed with the staff of the Ministry of Finance a number of reasons that may partly explain the discrepancy.

Summary of Mission Outcomes and Priority Recommendations

1. In response to a request from the authorities and as part of the United Kingdom’s Department for International Development (dfid) Enhanced Data Dissemination Initiative (EDDI) 2 project, a Government Finance Statistics (GFS) mission visited Maseru, Lesotho, during April 30–May 11, 2018. The mission was a follow up to two previous GFS Technical Assistance (TA) missions under the EDDI2 in March and November 2016 and in response to a request from the Lesotho delegation during a meeting with the Statistics Department (STA) at the 2018 Spring Meetings for GFS training. The mission’s main objectives were to: (i) provide training to GFS compilers on the Government Finance Statistics Manual (GFSM) 2014; (ii) review progress against recommendations from previous GFS TA missions; (iii) review the consistency of above-below-the-line fiscal statistics, and integration of flows and stocks of currently compiled GFS; (iv) identify source data, assess magnitude, and review mechanism for recording guaranteed debt and payment arrears; and (v) review current compilation of debt statistics and assist on improving compilation for reporting data to the World Bank-IMF Public Sector Debt Statistics (PSDS) database.

2. The mission provided training to GFS compilers from the Ministry of Finance and the Central Bank of Lesotho. While attendance varied during the training, participation averaged to about six staff in each session. Both lectures, and hands-on training were provided. Lectures were provided in the first four days of the mission and covered 12 lectures. Hands-on training was provided during the second half of the mission on downloading and uploading data files from the Integrated Correspondent System (ICS), and on filling the annual and high frequency (monthly) GFS questionnaire, and the quarterly PSDS questionnaire.

3. The mission reviewed progress against recommendations of previous GFS TA missions. The mission found little progress with implementation of past TA recommendations. Out of the 43 recommendations made during both the March and November 2016 missions, only 6 were completed, 7 partly completed, 2 were ongoing, while 28 were not done. The mission urged the authorities to follow through with implementation of TA recommendations to ensure progress in improving GFS compilation and the quality, comprehensiveness, and coverage of data available for policy decision-making.

4. The mission reviewed current compilation methods of GFS for the budgetary central government (BCG). The mission found out there were significant accuracy, classification, coverage, and comprehensiveness issues that undermine the credibility of fiscal statistics currently compiled and disseminated. Currently compiled and disseminated GFS include a large and persistent statistical discrepancy. The statistical discrepancy averaged to about a third of total revenue in preliminary data for FY2016/17 and FY2017/18. The mission identified and discussed with staff of the Ministry of Finance a number of reasons that may partly explain the discrepancy. The mission reiterated the need for reclassifications already discussed during previous GFS TA missions and identified other transactions that required reclassification for recording consistent with the GFSM 2014. The mission also found out that what constitutes the capital budget (currently included entirely as net acquisition of nonfinancial assets, with the exception grants to other levels of government) includes spending not related to capital formation. Further to that, not all entities making up the BCG are currently included in the statement of operations, as close to half of BCG entities (referred to as “parastatals” or “autonomous” bodies) are not being reported on.

5. The mission assisted with compilation of GFS for the local government. The mission assisted GFS compilers with the development of a template for collecting data from financial statements of local government entities and compiled data for 10 district councils using financial statements for FY2016/17. Using the data, the mission compiled three GFS statements: (1) a statement on sources and uses of cash; (2) a statement of operations; and (3) a balance sheet. No data was available for Maseru City Council (MCC) to be included in template.

6. The mission reviewed a draft of the chart of accounts currently under development. The mission made recommendations for improvements aiming mainly at: (1) using the opportunity of an update of the chart to align the economic and functional classifications to the GFSM 2014 economic classification; (2) allowing aggregation of transactions and stock positions by counterpart sectors; (3) expanding the classification by votes to align with the public sector institutional table.

7. The mission put staff in the debt department in touch with World Bank staff in charge of the quarterly PSDS database. A letter inviting the Ministry of Finance to start reporting QPSDS was sent to the Minister of Finance, and staff in the debt department were assisted in filling the debt data reporting template. While data is readily available for central government debt liabilities, no comprehensive data is available for the public corporations except for the Central Bank (no data were readily available during the mission for the Lesotho Post Bank and the Public Service Defined Contribution Pension Funds).

8. To support progress in the above work areas, the mission made the following priority recommendations carrying particular weight to make headway in improving GFS accuracy, classification, coverage, and comprehensiveness. Further details with specific recommendations can be found under the Detailed Technical Assessment and Recommendations section.

Table 1.

Lesotho: Priority Recommendations

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Detailed Technical Assessment and Recommendations

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A. Implementation of Recent GFS TA Missions’ Recommendations

9. Progress on implementing recommendations from recent GFS TA missions remains slow. There were of recent, two TA missions to Lesotho, under the GFS module of the EDDI2 project. The first mission took place during March 14–24, 2016, and the second during October 24–November 4, 2016. Both missions identified issues on the coverage, classification, and comprehensiveness of GFS and made recommendations mainly to reviewing and updating the institutional table of government, and reviewing and revising historical GFS series to incorporate suggested reclassifications. There has been some progress, albeit very slowly, since the missions left. The mission reviewed progress against recommendations of the previous GFS TA missions in March and November 2016 and found out that out of the 43 recommendations made during both missions; only 6 were completed, 7 partly completed, 2 were ongoing, while 28 were not done (Appendix I).

10. Following through with implementation of TA recommendations is critical in making headways to addressing existing issues with fiscal statistics. The accuracy, classification, coverage, and comprehensiveness issues in the GFS for the BCG currently compiled significantly undermine the credibility of fiscal statistics and hamper proper fiscal policy analysis for decisionmaking. Recommendations made during TA missions aim at improving the quality of data used for policy-making and efforts ought to be put in implementing the recommendations.

Recommended Action:

  • Assign responsibilities for following up on TA recommendations and follow through with implementation of recommendations.

B. Institutional Coverage of the Public Sector

11. The mission reviewed the existing institutional table for the general government and expanded it to cover the public sector. The public sector in Lesotho comprises 135 entities/units. Some of the units do not constitute institutional units as defined in the GFSM 20141 and are classified under the sub-sector controlling the unit/or undertaking the related transactions (e.g. principal repayment, interest charges, pensions and gratuities, statutory salaries and allowances, all under BCG).

12. Agreement has been reached to classify Lesotho Highlands Development Authority (LHDA) as a central government EBU. Discussions during the March and November 2016 TA missions were inconclusive on the appropriate sectorization of LHDA and the missions recommended that the Ministry of Finance, the Central Bank of Lesotho (CBL), and the Bureau of Statistics review the activities of LHDA to determine whether it really passed the market test to be classified as a public corporation, or whether it is indeed a nonmarket producer and would therefore be classified within general government. The mission noted that the authorities reached agreement on proper sectorization of LHDA within general government.

13. Further reviewing and finalizing the institutional table is required prior to adopting the table for compilation of macroeconomic statistics. There is a need to confirm the status of some entities, to know whether they still exist, or are still under the control of the public sector. The mission understood that the Lesotho Pharmaceutical Corporation has been privatized, while the Equestra Fleet Management was under the process of closure.

Recommended Actions:

  • Review, then finalize and adopt the institutional table of the public sector and use it consistently across all macroeconomic statistics (GFS, National Accounts, Monetary and Financial Statistics, External Sector Statistics).

  • Review and update the institutional table on a regular basis to incorporate new entities and/or remove defunct ones.

Figure 1.
Figure 1.

Lesotho: Public Sector2

Citation: IMF Staff Country Reports 2018, 282; 10.5089/9781484377406.002.A001

C. GFS Compilation for the Budgetary Central Government

Coverage

14. Coverage of currently compiled and disseminated GFS for the BCG is incomplete. The mission understood that coverage is currently limited to entities whose transactions are recorded in the Integrated Management Information System (IFMIS). Transactions pertaining to “parastatals” and “agencies”, other than grants sent from the BCG, are currently not recorded into IFMIS, and therefore not in the BCG statement of operations. The mission identified, from the list of parastatals and agencies, whose oversight is done by the Private Sector Development (PSD) department, 24 parastatals and 2 agencies (Table 2) that according to the GFSM 2014 sector classification, belonged to the BCG. Full coverage of transactions in the BCG statement of operations would require collecting timely data on all transactions of parastatals classified as BCG entities and including them in the BCG statement of operations.

Recommended Action:

  • Start collecting on a more regular basis data on transactions for all parastatals and agencies classified as BCG entities and incorporate the data into the BCG statement of operations.

Table 2.

Lesotho: BCG Parastatals and Agencies

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Source: PSD, Financial and Governance Oversight on State Owned Enterprises.

Basis of Recording

15. Recording of transactions in the BCG statement of operations is neither fully on cash basis nor on accrual basis. The authorities informed the mission that transactions are recorded on cash basis, but further discussions indicated that they are indeed not exactly on a cash basis. The mission understood that there could be a lag between the time either revenue, or expenditure is reported, and the time the actual cash is received or a payment made. While the lag may not be significant on revenue, it can and is sometimes significant on expenditure.

16. Bridging the time lag between recording of expenditure and actual payment would improve the current recording of transactions in the BCG statement of operations. Expense and transactions in nonfinancial assets recorded in the statement of operations are transactions that are currently “due for payment” in IFMIS, i.e. for which warrants have been issued, the delivery has been approved, and invoices have been received. What is due for payment is not necessarily paid immediately, as entities need to send paper work to the treasury for verification and instructing payment. When treasury has instructed payment, it usually takes an average of three business days for the CBL to make the payment. The IFMIS is not currently interfaced with the CBL systems to allow pulling information on when actual payments are made, which would otherwise be representing the true cash recording. The mission understood that recording in the IFMIS allowed to distinguish “commitments”—i.e., when a warrant is issued or a request for procurement is made; and “payment”—i.e., when the transaction is posted in the general ledger as paid, or in other words when the payment instruction is made. Considering that processing of payments when the payment instruction has been issued is generally fast at CBL, except at the end of the fiscal year when large volume of payments have to be processed, recording expenditure transactions on a “commitment” basis in the statement of operations, and the difference between commitments and payments in IFMIS as accounts payable would be a significant improvement to the current recording of transactions. Not only would that allow bridging the time lag, at least to a certain extent, between when commitments are made and when actual cash payments occur, but it would also contribute to improving the accuracy of GFS by recognizing payables, which are currently not recorded in the statement of operations and somehow buried in the statistical discrepancy. More importantly, it would also allow to monitor transactions leading to arrears accumulation.

Recommended Actions:

  • Move towards recording transactions on a modified accrual basis3 and start recording expenditure transactions on “commitment” basis.

  • Start recording transactions below the line on accounts payable as the difference between commitment and payment transactions in IFMIS.

Classification

17. The classification of transactions in the BCG statement of operations requires improvements. While the current classification of transactions in the BCG statement of operations is broadly aligned to the GFSM 2001/2014, there remain transactions that are improperly classified. The missions reiterated recommendations made during the March and November 2016 missions for reclassification of a number of transactions and identified additional items requiring reclassification. The following are transactions that require reclassification in the statement of operations:

  • Withholding tax—receipts on withholding tax are currently recorded in their entirety as other taxes on income, profits, and capital gains. The mission understood, however, that details making up the collections were available from the Lesotho Revenue Authority (LRA), allowing the distinction between those paid by individuals and those paid by corporations. Available details should, therefore, be used in reclassifying withholding tax as tax on income paid either by individuals or corporations.

  • SACU revenue—are classified separately in the statement of operation. However, none of the GFS manuals provides for such a revenue item, and the mission reiterated the recommendation from previous missions, to reclassify the SACU revenues in the appropriate revenue category, for international comparability, but include, as a memorandum item, for monitoring purpose, the total amount of SACU revenues. The current revenue sharing formula for the South African Customs Union (SACU) has three components, namely the Customs Component, Excise Component and the Development Component. Each component should be appropriately classified in the respective revenue category such that: (i) the customs component is classified as Taxes on International Trade and Transactions-Customs and import duties; (ii) the excise component is classified as Taxes on Goods and Services–Excise, and; (iii) the development component as Grant–from international organizations. The mission understood that for analytical purposes, and monitoring of the size and trend of SACU revenue, the authorities would still want to have the total shown in fiscal statistics. The mission suggested including total SACU revenues as a memorandum item to the statement of operations for that purpose.

  • Rand compensation—South Africa compensates Lesotho for lost seignorage revenue, for allowing the Rand to be accepted as legal tender in Lesotho. The transfer from South Africa is usually received in the first last quarter of the fiscal year (March), and is currently recorded in the statement of operations as a Tax on Property–Recurrent taxes on net wealth. The transaction does not really constitute a tax on property as defined in the GFSM 20144 but rather a transfer, i.e. an unrequited transaction. Since the transaction involves a foreign government making a transfer to Lesotho, the appropriate recording of the Rand compensation should be a Grant–from foreign governments.

  • Students’ scholarships—students pursuing higher education in Lesotho benefit from government scholarship, that are repayable upon completion of education and starting a job, at varying rates, depending on whether the students are employed abroad (100 percent), in the private sector in Lesotho (60 percent), or in government (50 percent). Scholarship payments are made on budget resources and are currently recorded, in their entirety, in the statement of operations as other expense–current transfers. Repayments, when they occur, are processed through the treasury and into a “revolving fund” set up specifically for the collection of students’ scholarships repayment and forming part of “trust money accounts”. Transactions in these trust money accounts are reflected in the total change in government deposits in the banking system, recorded in the statement of operations as change in currency and deposits, but no counterpart transactions are currently recorded, adding up therefore to the statistical discrepancy. Students’ scholarship payments amounted to 1.8 percent of GDP in FY 2017/18 and averaged a little more than 2 percent of GDP in recent years. No repayments are currently recorded in the statement of operations, however. The mission understood there were difficulties tracking the amounts that are currently repaid to make the appropriate recording in the statement of operations. Efforts should nevertheless be made to start tracking the information, with the assistance of the Manpower Development Secretariat, the treasury, and the CBL. When the mechanisms have been put in place to track the information, appropriate recording should apportion the scholarship payments between other expense–current transfers (for the nonrepayable component) and increase the loan assets (for the repayable component); and when the scholarships are repaid, record a decrease in the loan assets, that matches the increase in currency and deposits currently recorded.

  • Capital budget–transactions from the capital budget currently include transactions on compensation of employees, purchases of goods and services, grants, subsidies, social benefits and other expense. All grants in the capital budget are to other levels of government, i.e. to extrabudgetary entities, and to local governments. These are currently correctly added up to grants in the current budget, to other levels of governments. All the other categories of the capital budget, however, are also added to the corresponding category in the current budget. Guidance in the GFSM 20145 requires reclassification of compensation of employees, and purchases of goods and services as acquisition of nonfinancial assets, if they are meant for own account capital formation, i.e. the acquisition of fixed assets for own use. If, indeed, transactions on compensation of employees and purchases of goods and services in the capital budget are meant for the acquisition of nonfinancial assets, then they should be classified as acquisition of nonfinancial assets. If, however, they are not, as may be the case for spending under the capital budget on health and education (other than the acquisition of fixed assets), then they should be classified under the respective category in expense.

  • Interest expense on behalf of members of Parliament—currently include payments of interest on behalf of Parliamentarians for loans incurred with commercial banks. Interest is payable by units incurring liabilities by borrowing funds from other units (GFSM 2014-§ 6.63), and in this case, it is not the government borrowing, but Parliamentarians. Interest paid on behalf of Parliamentarians should be reclassified as compensation of employees, as wages and salaries in kind.

  • Debt payments on behalf of others—the mission found out that there were instances in the past, where government paid interest on behalf of other institutional units (other general government units, public and private corporations). The mission recommended that all these transactions are first identified, then reclassified accordingly6. Interest paid on behalf of other general government units would be reclassified as a grant, unless government acquires an effective claim, in which case it would be recorded as a loan asset. Interest paid on behalf of public or private corporations would be recorded as a capital transfer if government is not acquiring an effective claim, and as an acquisition of a financial asset otherwise, in the form of equity (if the government increases its shareholding because of debt assumption) or loan (if the government assumes the corporations’ liability with a third party, and exchanges it with a loan, presumably at better terms, to the corporation). Repayments of loans by these institutional units should not be classified as revenue, but in reduction of loan assets in the BCG statement of operations.

  • Debt assumption—there is no evidence of recording of debt assumed by government in the BCG statement of operations. Both the 2016/17 annual debt bulletin and the pre-audited consolidated financial statements for the year ending March 2017 refer to 89.7 million maloti the government assumed during FY2016/17, on guaranteed debt to CGM/Presitex Industry (61.6 million maloti) and TZICC (28.1 million maloti). The statistical treatment of debt assumption depends on (i) whether the new debtor acquires an effective financial claim on the original debtor, and (ii) if there is no effective financial claim, the relationship between the new debtor and the original debtor and whether the original debtor is bankrupt or no longer a going concern7. The recording of the transactions involving CGM/Presitex and TZICC (both textile industry private corporations), if the government acquired an effective claim for assuming their liabilities, should be recorded as an increase in liabilities for the government (for the debt assumption) reflecting an increase in domestic debt liabilities in the form of a loan from commercial banks (Standard Bank Lesotho), and an increase in loan assets (for the claim government acquires on CGM/Presitex and TZICC). However, if the government does not acquire an effective claim, a capital transfer ought to be recorded, as the counterpart transaction for liability assumed.

  • Policy lending—transactions related to policy lending are currently not comprehensively recorded in the statement of operations. The mission received drafts of pre-audited consolidated financial statements for the years ending March 2016 and March 2017. In the statements for the year ending March 2016, the stock of on-lending arrangements amounted to 926 million maloti. The stock increased to 1,045 million maloti in the statements for the year ending March 20178. Recording of on-lending arrangements is currently limited to recording the loans when they are incurred by the BCG but not when they are on-lent to other institutional units. Repayments by these institutional units, if and when they happen, are also not recorded comprehensively. Transactions related to these on-lending arrangements should all be properly recorded in the statement of operations.

  • Rent expense—are currently recorded in the statement of operations. These, however, do not constitute payments by the government to owners of natural resources, but rather constitute rentals and should be reclassified as purchases of goods and services.

  • Pension liabilities—are recorded in the statement of operations between FY2008/09 and FY2013/14. However, as the mission understood, these did not constitute pension liabilities of the government, since the government runs an autonomous defined contributions employment related pension fund since 2008. The transactions related to bridging the gap in the newly created pension fund, between contributions and benefits. The pension liabilities were not assumed by government and remained on the books of the pension fund. The transactions should be reclassified as a transfer not elsewhere classified under other expense.

18. Recording of transactions related to project disbursements remains a challenge. While compilation is expertly done to matching all annual disbursements (sources of funds) with all expenditures (uses of funds) on external capital grants and loans, the mission highlighted to the authorities a potential issue that may affect accuracy in the recording of transactions. As the mission noted, disbursements in-year take different forms mainly as: (i) direct payments from the creditor/donor, to a supplier of goods abroad and goods are shipped to the country; (ii) direct payments from the creditor/donor to a supplier of services (consultancy services, studies, etc.) that may be resident or nonresident; and (iii) cash transfers to the project management account within the banking system in Lesotho. Changes in the deposits of project accounts as accumulation (disbursements) or reduction (drawdowns for payments in country) are reflected in the total government change in currency and deposits, however, without necessarily having a counterpart transaction above the line as a revenue (disbursement) or expenditure (expense or acquisition of nonfinancial asset). This is the case because no comprehensive information is currently available on “actual” disbursements, and associated spending, especially on capital grants revenue. The lack of comprehensive information constrains compilers to record all disbursements as spent, while part may not be “actually” spent, but remain in “deposits” in the banking systems, therefore creating discrepancies in transactions above and below the line in the statement of operations. The mission recommended identifying all the accounts of government projects at the Central Bank of Lesotho (CBL) funded with external capital grants and/or loans, and adjust expenditure, with the change in the stock positions in these accounts (upward for drawdowns, and downward for accumulation). This would be a temporary measure to eliminate discrepancy in transactions above and below the line, until comprehensive information on actual disbursements and spending becomes available.

Recommended Actions:

  • Implement all reclassifications recommended during the mission.

  • Identify all transactions not currently included, or partially included in the BCG statement of operations (i.e.,: (i) students’ scholarships, (ii) debt assumptions and debt payment on behalf of others, (iii) on-lending) and incorporate them, and also adjust data historically.

  • Start to adjust transactions in nonfinancial assets with the change in the stock positions of accounts of government projects at the Central Bank of Lesotho (CBL) funded with external capital grants and/or loans.

Data accuracy

19. The statistical discrepancy in the BCG statement of operations is high. The mission discussed with the authorities, items that may be contributing to explaining the size of the statistical discrepancy, including as discussed in paragraph 17 and 18 earlier, transactions that are currently not comprehensively included in the statement of operations, but also the coverage discrepancy of transactions above and below the line. The coverage of transactions above the line in the BCG statement of operations is limited, as discussed in paragraph 14, to a narrow set of institutional units, whereas transactions in currency and deposits, as taken from the depository corporations survey include all the central government entities (i.e. including BCG entities not currently included in the statement of operations, but also EBUs). Figure 2 below shows trends of the statistical discrepancy, and magnitude, relative to GDP and to the fiscal balance.

Figure 2.
Figure 2.

Lesotho: BCG Statistical Discrepancy

Citation: IMF Staff Country Reports 2018, 282; 10.5089/9781484377406.002.A001

Source: Lesotho authorities and staff calculations.

20. Better data management could reduce inconsistencies between fiscal files. The mission identified inconsistencies between two of the main GFS files: the “MF_SGO_DB” file that is used primarily to aggregate monthly fiscal data from all the various sources; and the “MF_MTFF_DB” file that is used for projections and preparation of the medium term fiscal framework and annual budget. Both files include historical series, but only the “MF_MTFF_DB” includes projections. Historical series should, in principle, be the same but were not in the files provided to the mission. The authorities investigated the differences and found out they were due to updates made to one of the files and not reflected in the other file. Changes were made to the files to make them consistent.

Recommended Actions:

  • Reduce the statistical discrepancy to less than 1 percent of GDP.

  • Ensure proper data management to maintain consistency between the “MF_SGO_DB” and “MF_MTFF_DB” files; i.e., ensure that updates to either file is reflected into the other file whenever there is an update.

D. GFS Compilation for the Local Government

Coverage

21. No local government GFS is currently compiled. Local government in Lesotho comprises 10 district councils, and one city council, Maseru City Council (MCC). The 10 district councils report comprehensive data to the Ministry of Finance that allows compilation of comprehensive GFS statements. The mission reviewed audited annual financial statements of the 10 district councils for FY2016/17 and compiled three GFS statements: (i) a statement of sources and uses of cash; (ii) a statement of operations; and (iii) a balance sheet. No data were available for MCC for compilation and consolidation of local government with BCG GFS.

22. Templates were created to compile GFS statements. Templates were created using district councils’ financial statements that allow compilation of three GFS statements.

Recommended Actions:

  • Use the template created during the mission to compile GFS for district councils for previous years, and start compiling GFS for district councils regularly.

  • Collect data and start compiling GFS for Maseru City Council.

Basis of Recording

23. Financial statements of district councils include noncash transactions. Financial statements used for the compilation of GFS for district councils include noncash basis transactions on liabilities. Transactions and stock positions on accounts payable are included in at least three of the district councils (Maseru, Leribe, and Botha Bothe).

Classification

24. All district councils use the same chart of accounts consistently. The district councils’ chart of accounts is comprehensive and clearly distinguishes expense categories (41: salaries in post and allowances; 42: travel and transport; 43: operating costs; 47: grants; and 48: other expense); and transactions in nonfinancial assets (53: fixed assets). The fact that all district councils use the same chart of accounts, makes it easy to map and aggregate their data. The classification, however, differs from that used for BCG entities, and is not currently used in EPICOR, the current Integrated Financial Management Information System (IFMIS). No district councils’ data, other than grants from the BCG, are currently recorded in IFMIS.

Recommended Actions:

  • Introduce the new chart of accounts in financial reporting of local governments (district councils and Maseru City Council).

  • Introduce all local governments financial data in the new IFMIS.

E. New Chart of Accounts

25. A new chart of accounts is being developed. The current chart of accounts (COA) was introduced in 2009, along the current IFMIS. The new COA was developed to address shortcomings in the existing classification that does not allow independent reporting of administrative, functional, and economic classification at a granular level, for lack of proper segmentation in the classification. The new COA includes 10 segments, each for a different type of classification (functional, economic, administrative, etc.) and would be expected to address some of the issues with the existing.

26. The economic and functional classifications of the new COA are broadly aligned with the GFSM 2001. On the request from the authorities, the mission reviewed the new chart of accounts and found out that a few adjustments would be required for both the economic and functional classifications to be aligned to the GFSM 2014. The mission stressed that it made more sense to use the opportunity of a new chart of account development to having classifications aligned to the GFSM 2014 already, rather than having to do that later when the COA is again revised. The authorities mentioned, however, that not considering a shift to a GFSM 2014 consistent classification was to not substantially deviate from the existing chart of accounts.

27. The mission provided comments for consideration to further improve the new COA.

The comments for improvements are aiming mainly at: (1) using the opportunity of an update of the chart to align the economic and functional classifications to the GFSM 2014 economic classification; (2) allowing aggregation of transactions and stock positions by counterpart sectors; (3) expanding the classification by votes to align with the public sector institutional table.

Recommended Action:

  • All recommendations made for required changes on the economic and functional classifications of the COA should be implemented for consistency with the GFSM 2014.

F. Public Sector Debt Statistics

Coverage

28. Coverage of currently compiled and disseminated debt statistics is limited. Coverage is limited to central government external debt and budgetary central government domestic and external debt. No data is currently compiled on extrabudgetary units (EBU) domestic debt. No debt data is currently compiled and disseminated for public corporations, and the public sector.

29. The authorities have been invited to start disseminating quarterly debt statistics. The mission introduced the authorities to the World Bank’s Quarterly Public Sector Debt Statistics (QPSDS) reporting and had the Bank issue a letter inviting the authorities to start reporting quarterly debt PSDS. The mission assisted in filling a QPSDS reporting template with data on external central government debt; budgetary central government domestic and external debt; and CBL for 2016: Q3 to 2018: Q3.

30. Broadening the coverage of debt statistics compilation and reporting is required. The current coverage would need to be expanded to first include all debt liabilities of general government and then also include debt liabilities of public corporations. EBUs domestic debt needs to be compiled, as well as any local government debt liabilities that may exist. Financial statements for the 10 district councils making up part of the local governments for FY2016/17 indicated no borrowing, but included small values on accounts payable liabilities. There was no information available on MCC to determine whether it borrowed. Next in expanding the coverage would be to include public corporations. There are only eight public corporations: three are financial and five are nonfinancial. Data on the financial corporations (CBL, Lesotho Post Bank, and Lesotho Pension Fund9) should be readily available and similarly, data for nonfinancial should also be available from individual financial statements of these entities, if they are produced. Debt liabilities of CBL were included in the QPSDS reporting template, but excluded IMF loans that are also included in the budgetary central government loan liabilities.

Recommended Actions:

  • Fill the QPSDS reporting template for quarters prior to 2016: Q3 and disseminate the data.

  • Start compiling data on debt statistics for extrabudgetary units, and local governments, and consolidate with BCG data into general government debt statistics.

  • Collect and compile debt statistics for public financial and public nonfinancial corporations.

  • Start disseminating debt statistics on a quarterly basis to the World Bank PSDS database.

G. Data Dissemination

31. Annual and monthly data dissemination to the IMF’s Statistics Department (STA) should now be easier. The mission incorporated into the authorities’ main compilation file, the “MF_SGO_DB” file, two sheets: one for the annual time series GFS questionnaire, and the other— for the high frequency (monthly) GFS questionnaire. The two sheets were linked directly to the data in the “MF_SGO_DB” file so that any changes to the data in the file is directly incorporated into the two sheets. Dissemination of annual data would only entail copying and pasting data into the annual timeseries questionnaire and uploading the file onto the Integrated Correspondent System (ICS).

32. The annual and monthly GFS templates were pre-populated with revised data incorporating recommended reclassifications. Some of the reclassifications discussed in paragraph 17 were incorporated to the data but would require further refinement. Reclassifications marginally affect fiscal aggregates. Total revenue remains unchanged, while reclassifications from/to expenditure to/from transactions in financial assets and liabilities averaged to a little less than 1 percent of GDP in data for the last 5 years (Figure 3). Reclassifications included in the pre-populated annual and monthly GFS templates are the following:

  • Taxes on property exclude the RAND compensation;

  • Taxes on goods and services (excises) include 30 percent of the SACU receipts (the exact amount should be included);

  • Grants include the RAND compensation as grants from foreign governments and 40 percent of the SACU receipts (the exact amount should be included) as grants from international organizations;

  • Taxes on international trade (customs and import duties) include 30 percent of the SACU receipts (the exact amount should be included).

  • Compensation of employees adds up the current budget compensation of employees and Parliamentarians interest payment made by the government on their behalf;

  • Interest expense excludes interest paid on behalf of Parliamentarians;

  • Grants expense include grant expense on the capital budget;

  • Other expense that only take 50 percent of students’ scholarships and include the pension liabilities repayment.

  • Net acquisition of nonfinancial assets sums up the capital budget excluding grants in the capital budget, plus net acquisition of nonfinancial assets.

  • Transactions in financial assets include 50 percent of students’ scholarship as loans.

  • Net incurrence of liabilities excludes the pension liabilities repayment.

Recommended Action:

  • Refine the reclassification in the BCG statement of operations and disseminate the annual and monthly series to STA and the National Summary Data Page (NSDP) respectively.

Figure 3.
Figure 3.

Lesotho: Differences in Statement of Operations After Reclassifications

Citation: IMF Staff Country Reports 2018, 282; 10.5089/9781484377406.002.A001

Source: Lesotho authorities and staff calculations.

Officials Met During the Mission

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Appendix I. Assessment of Recommendations from Previous GFS TA Missions

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(1) is a recommendation included in both the March and November 2016 TA reports.

1

GFSM 2014 § 2.22.

2

Further investigation after the mission led to reclassification of entities that had been classified as budgetary during the mission, reducing the total of budgetary central government entities from 83 to 79.

3

A modified accrual basis of recording allows recognition of noncash items in transactions in financial assets and liabilities (accounts receivable/payable).

4

GFSM 2014 § 5.46 and 5.50.

5

GFSM 2014 § 6.9 and 6.27.

6

GFSM 2014 § A3.30 – A3.31.

7

GFSM 2014 § A3.26 – A3.29.

8

Also available in the 2016/17 annual debt bulletin.

9

The Pension Fund includes two schemes, all for civil servants: (i) the Public Officers’ Defined Contribution Pension Fund, and (ii) the Specified Offices Defined Contribution Pension Fund.

Same Series

Other IMF Content

Other Publishers

Cover IMF Staff Country Reports
Kingdom of Lesotho: Technical Assistance Report-Government Finance Statistics
Author: International Monetary Fund. Statistics Dept.
Volume/Issue:
Volume 2018: Issue 282
Publisher:
International Monetary Fund
ISBN:
9781484377406
ISSN:
1934-7685
Pages:
29
DOI:
https://doi.org/10.5089/9781484377406.002

Lesotho: Public Sector2

Lesotho: BCG Statistical Discrepancy

Lesotho: Differences in Statement of Operations After Reclassifications