PARLIAMENT OF THE KINGDOM

OF
LESOTHO

ECONOMIC TRANSFORMATION AND DIVERSIFICATION

TOWARDS SUSTAINABLE ECONOMIC GROWTH AND
EMPLOYMENT

Budget Speech to Parliament for the

2011/2012 Fiscal Year

By
Honourable Timothy T. Thahane
Minister of Finance and Development Planning

Maseru - Lesotho
14th February 2011
Madam Speaker,

Allow me to pay my respects to you and through you to:

His Majesty King Letsie III and Head of State
The Right Honourable the Prime Minister and Head of Government
The Honourable Deputy Prime Minister and Leader of the House
The Honourable President of the Senate
My Colleagues, Honourable Ministers of His Majesty‟s Government
Honourable Members of both Houses of Parliament
Excellencies Heads of Diplomatic Missions and International Organisations
here present
Distinguished members of the Media
The entire Basotho nation across Lesotho and abroad
Ladies and Gentlemen

Madam Speaker

1. I have the honour to present to this Honourable House and its

Members, who, on this occasion have been joined by the Honourable
President of the Senate and Honourable Senators. As you have
always emphasized in the past, this is an important day in the life of
our Nation. It is a day when the Executive, through the Minister of
Finance, reports on the Economic and Financial State of the Nation;
on its performance towards the attainment of Vision 2020, and, on the
challenges ahead and how they can be turned into opportunities.

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 Introduction

2. The Budget I am presenting today looks back briefly on the road we

have travelled, the valleys and hills we have crossed, and the
opportunities we must capitalize on. It highlights some of the
achievements, notes, the levers and drivers we can utilize to fly like
the Eagle. My speech may be longer than in the past because it is an
account of which the Government has done during the life of this
Parliament.

3. A little over two years ago, the world confronted an economic and
financial turmoil that shook its foundations. The turmoil has been
variously compared to the Great Depression of 1929-33 or to a
financial “Tsunami”. The aftershocks and to-day‟s hesitant global
recovery still pose huge economic and social risks and challenges to
our Nation.

4. Lesotho‟s economic growth has shrunk; unemployment, especially

among the youth, has increased; Our exports have contracted; and,
Basotho mine workers in South Africa have been retrenched.
Government revenues, especially from SACU have declined, thereby,
making it more difficult for Government to implement policies that
lean against the wind. Lastly, our Development Partners, such as
Ireland, the United States of America and Germany, to name a
few, have faced unprecedented challenges in their own countries.
But, they have kept their commitment and solidarity with the low
income countries by maintaining their development assistance. New
and emerging Development Partners, such as the People‟s Republic
of China, India, Brazil, The Gulf Cooperation States of the Middle
East and others, have stepped in to become the new locomotive
engines for global economic recovery.

5. This turmoil has placed Lesotho and its people between a rock and
hard place. We must make hard choices. We must decide to move
into the future, in line with Vision 2020, as a united, dynamic, highly
competitive and agile nation that produces goods and services for
global markets; as a nation that equips its youth with skills and

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 disciplines to compete for jobs in the knowledge economy of the
future. This vision of Lesotho is a clarion call to economic
transformation, diversification, job creation and a radical change in
the mind-set of our people, especially the youth. It is a call to
embrace change, competitiveness, science, innovation, research and
technology. It is not a call to surrender our freedom; to buckle under
fierce competition; it is not a call to be wiped away from the face of
the earth and be swallowed by another State as some misguided
voices seem to suggest.

Madam Speaker

6. In my Budget a year ago, I laid special emphasis on the need to

remain focused on fundamentals, even when economic storms
rage around us. I am pleased to report that the Government has
remained focused on the following twelve key goals that ought to
guide any Government of Lesotho:

i) Pursue a strategy for high, sustainable and shared

economic growth within sound and stable macro-economic
frameworks;

ii) Create meaningful jobs in and through the private sector,

particularly for the youth;

iii) Develop and diversify industrial and manufacturing

enterprises that take account of and exploit Lesotho‟s regional
location;

iv) Enhance food security by diversifying into high value cash

crops and establish strong Supply Chains that include
research, production storage, processing distribution and
marketing;

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 v) Promote decentralization and build capacity of District and
Local Councils in financial management, planning,
programming, execution and monitoring;

vi) Establish high-tech enterprises, that are innovative and

embrace technology and use of broadband;

vii) Develop relevant, high level technical and vocational skills

at primary and high school levels and link them to world class
tertiary education institutions;

viii) Build sound networks of health and healthcare institutions

including those for HIV and Aids;

ix) Develop good infrastructure of urban and rural roads that link
the mountains and the lowland areas;

x) Engage our neighbour, South Africa, in a new dialogue aimed

at building a new relationship based on mutual benefits,
shared values, common vision and provision of rapid transit
for Lesotho‟s imports and exports, citizens and tourists;

xi) Consolidate our democracy, peace and stability and

promote a culture of tolerance and integrity; and

xii) Provide social protection, care and support of our elderly,

orphans and vulnerable children.

Madam Speaker

7. If we could resolve to pursue these twelve broad goals cooperatively

and consistently, we can transform Lesotho‟s prospects for the
better and give hope to the young people. To translate these broad
goals into concrete actionable plans, the Right Honourable Prime
Minister launched a process of preparing a National Strategic
Development Plan about ten days ago and I appeal for inputs of the
Honourable Members. The plan will need to be all-encompassing.

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Madam Speaker

8. The present Budget has been formulated with a focus on:

 Maintaining a sound macro-economic framework in order to

avoid plunging the country into a financial crisis;

 Allocating resources to construct roads and purchase heavy

equipment to build more Road Construction Units in the
District Councils;

 Extending village water supplies and sanitation and

accelerating water supply connections in the urban areas. It is
expanding fixed line cellular and electricity networks and
connecting more households than at any time in the history of
Lesotho;
.
 Providing continued investment in free primary education,
school feeding and construction of new secondary schools and
classrooms;

 Catering for adjustment of teachers‟ salaries according to their

new salary scales;

 Continuing the construction of over 150 clinics throughout

Lesotho and completing a new 440 beds Referral Hospital next
month and opening it formally in September or October;

 Supporting older citizens with pensions and providing

protection for orphans and vulnerable children; and
.
 Continuing to build bridges over some of the most impassable
rivers, such as Senqu and Senqunyane, Sebapala, Qhoali and
Mohlapiso.

9. Above all, the Budget provides for the start of construction of

Roma-Ramabanta-Semonkong Road, across Senqunyane-Senqu
bridges to Qacha‟s Nek. It has allocated funding for the construction

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 of Sani Top to Mokhotlong Road and for the design of Thaba-Tseka-
Taung- Mokhotlong Road and rehabilitating and reconstructing
Oxbow-Mokhotlong Road. Negotiations are also at an advanced
stage to generate electricity using wind and to expand solar power
along Mphaki-Qacha‟s Nek grid.

10. Last but not least, this year the Government will launch a M50
million Partial Guarantee Fund to provide, together with the
Commercial Banks, entrepreneurial training on how to start and run
a business, prepare a Business Plan and provide financing for the
plans prepared by the trainees. This initiative is directed especially to
young people and women who can organize themselves into
enterprises. It is of no use to provide access to finance when the
applicants do not know how to run a successful business. The Fund
and Banks will share the risk in cases of genuine business failures.

Madam Speaker,

11. The success of the Partial Credit Guarantee Scheme and the
Entrepreneurship Initiative will depend on:

i) How well the applicants organize and work cooperatively

together to identify business ventures and opportunities;

ii) How willing, disciplined and committed the applicants are; and

iii) Repay and service their loans.

Recent Regional and International Developments and their

Impact on Lesotho

Madam Speaker

12. Let me touch briefly on the recent international and regional

developments so that we can put Lesotho‟s efforts into context and
thereby see the importance of its policy responses. A year ago, I

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 reported to this House that the U.S. economy had contracted by an
annual average of 3 percent for the year 2009 and that
unemployment was recorded at 10.2 percent - the highest since
1983. For us, it meant that Americans had less disposable income to
buy our textile exports. That underscored the need and urgency to
diversify our markets and export products. Today there is notable
recovery in the U.S. economy. Output growth of 1.7 percent was
recorded in the second quarter and a further improvement of 2.5
percent in the third quarter of 2010. Unemployment went down to 9.6
percent in the third quarter of the same year. This signals a fragile
recovery which may impact on our textile exports to the US. But the
challenge for our textile industry is still to improve their ability to
compete with other textile producers, especially from Asia. We
recognise however, that our people do not have a long tradition of
knitting. But they are fast learners. Despite these challenges,
manufacturing employment has seen an increase of 5.2 percent from
44, 098 in the first quarter to 46,379 in the third quarter of 2010.

13. In the Euro-zone, 2009 saw output decline averaging 4.9 percent in
the second and third quarters and unemployment averaging 9.5
percent for the same period. In terms of growth, there has been an
average growth of 1 percent, even though unemployment increased
to 10 percent, year-on-year. The worst hit countries in the Euro-zone
in terms of adjustment are Greece, Ireland, Portugal, Spain and the
United Kingdom which has experienced a growth of 0.5 percent.

14. The South African economy recovered with a recorded growth of 3.1
and 2.6 percent in the second and third quarter of 2010, respectively.
This compares to an average contraction of 2.5 percent during the
same period in 2009. Unemployment, however, worsened from an
estimated 24.5 percent during the third quarter of 2009 to 25.3
percent in the third quarter of 2010. Inflation slumped from 5.1
percent in the first quarter to 3.4 percent in the last quarter. Key
interest rate also went down from 7 percent in the first quarter to 5.5
percent in the last quarter of 2010. A Combination of these factors
creates a favourable environment for investment that is necessary for
growth. But the strong Rand against the major trading currencies,
especially the U.S. dollar, renders our exports less competitive with

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 the rest of the world, and could have dire consequences for prices,
employment and incomes in Lesotho.

15. The appreciation of the Rand against the US Dollar has proved a
threat to Basotho mineworkers in South Africa. Between the first and
third quarters of 2010, the number of Basotho mineworkers declined
by 1.9 percent from 43.092 to 42,252. Retrenchment of migrant
workers means a decline in remittances which affect the living
standards in the rural areas where most of the workers come from.
The strong Rand and the weak dollar have compelled the
Government to put top priority on improving the competitiveness of
our textile and diversifying our markets and products. It has also
compelled the Government to seek ways and means of exporting
textile to SACU, SADC, and other African markets.

Economic and Fiscal Performance in 2010/2011

Madam Speaker

16. The preparation of the 2010/11 Budget against the backdrop of the
global economic and financial crisis has provoked vigorous debates
not only in the Government but also in the Boards of the World Bank
and the International Monetary Fund. The Government‟s total
domestic revenue suffered a decline of about 30 percent with more
than 50 percent reduction in SACU receipts which have been the
bulwark of Lesotho‟s national budget ever since 1969. This meant
that Government had to deal with an unprecedented fiscal
consolidation effort in the midst of the need to counter the effects of
the crisis, by stimulating the economy to secure jobs and preserve
the capacity of the economy to recover. The result of these debates
was the largest budget deficit in the history of Lesotho, at 12.3
percent of GDP.

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 Madam Speaker

17. With regard to SACU I wish to clear some confusion that seems to
have crept into the public debates recently. SACU Revenue Pool
belongs to all SACU Member States. It is composed of Customs,
and excise duties. Duties are charged on all goods imported into
Botswana, Lesotho, Namibia, South Africa and Swaziland. South
Africa has been asked to manage this Pool on behalf of all the
Member States. Although South Africa is a major contributor to the
Pool in terms of its imports, it does not own the Revenue Pool and
has never made such a claim. Second, because South Africa is the
largest economy compared to the four BLNS economies, its imports
into the SACU Area constitute the largest share, hence, the largest
share of the duties that go into the Pool. Third, the Pool is divided on
the basis of imports of each Member State of SACU relative to the
size of the Pool. Therefore, Lesotho‟s share is proportionate to its
imports from South Africa, other SACU members as well as the rest
of the world. Fourth, if economic growth of the SACU region
declines, as it happened in 2009, the imports will decline, and so will
the duties that go into the Revenue Pool. Also declining will be the
shares of each of the five members of SACU. Naturally, we can
expect the shares of each of the five members of SACU to decline
too. This is not a fault of any of the Member States or its
incompetence to manage its economies. I wish to make it clear to
pseudo-experts that SACU revenue belongs to us. How each
Member uses its share is the decision of that Members‟ Parliaments.

18. Finally, I wish to note that the formula used to effect payments from
the Pool works with a time lag. The first payment to each Member
State is made on the basis of projected imports for each Member
State. An adjustment is then made a year later on the basis of actual
and audited imports and trade figures. This explains why all the
BLNS countries had to pay back to the Pool after the financial crisis
that affected the volume of imports into the SACU area. I am pleased,
however, to say that we expect a slight increase in the SACU
revenue to M2,752.6 million next year compared to M2,161.9 million
this year. In 2012/13 and 2013/14 we expect SACU Revenue to be
M4,287.0 million and M4,480.1 million, respectively.

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19. Before leaving SACU, I wish to state that SACU is well and thriving.
The Heads of State and Government of SACU Member States have
re-affirmed their commitment to SACU and have offered SACU‟s
experience of over 100 years as a building block for a SADC
Customs Union. They have also directed the Council of Ministers to
review the formula for Revenue Sharing with a view to removing the
current wide swings in the revenue shares because of fluctuations in
imports. Notwithstanding this, the challenge for Lesotho is to
mobilize optimally its domestic revenue and to base its long
term development planning on it. SACU revenue must come on
top to enable us to accelerate the financing of our capital formation,
economic transformation and diversification.

Sources of Historic Growth and Challenges Ahead

Madam Speaker

20. It is important to go back a few years into the performances of the

various sectors and identify the levers and drivers of economic
growth in Lesotho. Let me take the largest sector first, Agriculture. It
is the backbone of our economy. 77 percent of people live in the
rural areas and make their living from subsistence farming there. It
has unfortunately not been doing well. At the beginning of the last
decade, agriculture contributed over 10 percent to our Gross
Domestic Product (GDP). But this has gradually gone down to only
7.9 percent in 2009/10. The largest contributor to this decline is crop
production whose contribution to GDP fell from 4.8 percent in
2000/01 to only 1.8 percent in 2009/10. Livestock‟s contribution has
remained at around 4.5 percent during the same period. The Medium
Term projections show that Agriculture will continue to decline
unless the Government together with the Private Sector
undertake radical, comprehensive and coordinated programmes
that address the following problems:

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  the large number of hectares of land that lie fallow each year
due, in part, to the increasing poverty of subsistence
farmers; at the same time there is growing landlessness;

 The effectiveness, coordination and management of all the

institutions that support subsistence farmers throughout the
Supply Chain i.e. starting from what to plant, when, soil
preparation, management, care of plants, their harvest, storage,
processing, marketing and distribution to the final consumers;

 The involvement of private sector at each stage of the Supply

Chains.

21. Clearly, the “rifle shot” approach that has been used in Agriculture so
far and the beautiful plans that have been drawn over the years have
not worked. They must be reviewed, implemented or abandoned.

22. Still on Agriculture, there is a need to address through a concerted

campaign of scientists, researchers, chemical companies and
the Ministry of Agriculture the problem of the increasing Nut
Sedge grass (known in some place of Lesotho as Motaba-tabane)
which is increasingly taking over our limited arable land. Research
shows that this grass is difficult to eliminate and grows very fast when
there is moisture on the ground. It is a tough competitor for ground
resources and its roots produce substances that are harmful to
plants. Valuable arable land is being taken over by this weed. Its
scientific name if Cyperus Rutundus. Perhaps our Development
Partners can join in the campaign. We need land to grow food.

23. Mining has increased its contribution from 0.2 percent of GDP in
2000/1 to 8.1 percent in 2007/8 before the onset of the global
economic and financial crisis. Even then, experienced a slight dip of
6.1 percent and shows every sign of being a strong contributor given
the recovery in the global prices of diamonds and Government plans
to cut and polish diamonds here in Lesotho. Letšeng and other
mines, such as „Mothae, Kao, Liqhobong and Sekameng are
expected to provide a strong source of growth in the future although
not so much of employment.

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24. The Manufacturing and secondary sectors have been dominated by
Textile and Clothing whose contribution to employment is
unquestionably higher than that of the public service. Manufacturing‟s
contribution fell from a high of 20.6 percent of GDP in 2002/3 to only
14 percent in 2009/10. This was due to the impact of the global
financial crisis and the stiff competition from the Asian producers at
the end of the preferences which Lesotho enjoyed as Least
Developed Country under the Multi-Fiber Agreement. The other
threat to the Textile Sector is the end of AGOA which is near. This
puts the urgency on the Government and the industry to jointly
find new markets and new products. If the Textile and Clothing
sector were to close, over 45,000 of our people would be thrown out
of work and this would cause untold hardships to many families. The
other challenge is for Government and Industry to find quickly new
ways of disposing of the waste from the factories in a more
environmentally safe manner. For its part, the Government is
exploring the establishment of a large incinerator plant that will cater
for industry and for other waste generated by the community.

25. The contribution of construction to GDP fell from the high of 10.5
percent to 4.5 percent in 2009/10 when Mohale Dam construction
was completed. It is expected to pick up when the construction of
Metolong Dam and ancillary projects begin this year and when Phase
II of Lesotho Highlands Water Project begins. The contribution of the
Tertiary sector which includes Public Administration and other
services has remained at about the same level rising from 53.7
percent in 2000/01 to 58.7 percent.

26. One sector which has immense potential for job creation is Tourism.
The Government plans to review this sector critically including
partnerships with the private sector. It plans to create space for
entrepreneurs that have experience and financial capacity to join
hands with Government and locals. Under the Ministry of Tourism,
the Government plans to take a fresh look at the operations, the
governance arrangements and the expertise for managing and
promoting the sector both at home and in the region. In this context,
Technical Assistance will be sought from our Development Partners
for personnel with experience and expertise to mentor and train our
staff.

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27. In closing this brief historical perspective on growth, I wish to note the
contribution of Public Administration to GDP growth. In 2000/01
Public Administration contribution to GDP was 9.9 percent. It
increased to 13.1 percent in 2009/10. This shows that during this
period, the Public Administration expanded in size and cost more
than investment in real assets where sustainable growth is
generated. This explains why the Government has adopted a Policy
to keep the cost of Recurrent Budget relatively constant in real terms
and to expand Capital investment Budget. It also explains why the
Government wants to create space for private sector to grow by
outsourcing all those activities that can best be performed by the
private sector and are not core to public service.

Millennium Development Goals – Progress

Madam Speaker

28. A word about the progress towards the attainment of Millennium

Development Goals. Lesotho has suffered heavily from the effects of
the global economic and financial crisis including from the high prices
of food and fuel during pre-crisis period. This has halted the progress
that we were making towards the attainment of some MDGs. It has
put some MDG off-track. The main constraint is the lack of resources
and weak implementation capacity.

29. The first goal is combating HIV, TB and related diseases through
universal access to care and treatment for HIV/Aids and to halt and
reverse the incidence of T.B. Despite massive efforts by the
Government, and Development Partners, indications are that
progress in this goal is very slow. The challenge is to double efforts
in implementing the current programmes. The other goal where
progress is slow is that of ensuring environmental sustainability. The
goals of reducing child mortality by two-thirds between 1990 and
2015 in the under-five children and of reducing maternal mortality rate
by three quarters, will most likely remain unmet. On eradicating
extreme poverty and hunger, the data indicate that this goal will not

14
 be met. The two goals that Lesotho will meet by 2015 relate to
universal access to primary education for both boys and girls and to
eliminating gender discrimination and inequality. But more efforts will
have to be devoted to the latter goal if the present momentum is to be
sustained.

Madam Speaker

30. Let me now turn to the budget performance in 2010/11. Parliament

approved revenue of M8,183.5 Million inclusive of grants of M1,809.1
Million. I am happy to report that during the year there were positive
developments with regard to addition revenue that was not included
in the budget. Government received M466.2 Million in payment of
outstanding SACU adjustments for 2006/07 and 2007/08 following
conclusion of the arbitration in favour of Botswana, Lesotho, Namibia
and Swaziland. Another M500 Million was received from the Central
Bank of Lesotho as payment of dividends for the 2008/09 and
2009/10 years. This means that the expected revenue collections at
the end of March 2011 is estimated at M8,9206.2 Million, which
represents over-collection of M722.5 Million or 9 percent over the
approved annual revenue figure.

31. On the expenditure side, Parliament approved a total budget of

M10,244.6 Million split into M6,575.0 Million and M3,569.6 Million, for
recurrent and capital expenditures, respectively. The year-end
expenditures are expected to record M10,168.8 Million, which is
about 99 percent of the appropriated total budget. Recurrent
expenditure is expected to reach M6,817.1 Million or 22 percent
above the budget, while capital expenditure is expected to amount to
M3,351.7 Million or 94 percent of the budget. This is for the first time
that expenditures have performed close to budget. The deficit for
2010/11 is expected to be 8.2 percent of GDP instead of the
budgeted 12.3 percent. This is due to the unanticipated revenue
referred to above.

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 Budget Allocations for 2011/12

32. This year‟s Budget is the most difficult the Government has ever had
to put together. Looking at the Revenue side, Honourable Members
will note that:-

 There was a sharp decline in revenue especially SACU

revenue. This was accompanied by a slow response or poor
collection in non-tax revenue;
 Although LRA has continued to improve its revenue collections
and although more and more Basotho are paying their income
and corporate taxes, the culture of tax evasion still continues
at a high rate, especially at the Border Crossings;
 There is a lot of rampant fraud and corruption involving
collaboration between public servants and private sector.

33. Unless all of us pay our FAIR share of the taxes or pay for the
services we receive, there is no way Government will have the
resources to build schools, hospitals, roads, bridges, or provide water
supplies, remove garbage or assist in measures to protect the tons
and tons of soil that washes away each rainy day. If Government is
to raise funds, it can only do so by raising taxes and nobody wants
this.

34. Our Development Partners, who come to our land, come only to
support our efforts not to replace them. Their countrymen have paid
their taxes, and for their services although their governments are
cutting salaries, pensions and services because of the current
economic crisis, they have chosen to maintain their aid levels to us.
This should make us stop and think as people about the kind of
message we are sending to our Partners. How long do we think they
can continue to support our consumption?

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 Madam Speaker,

35. With regard to paying taxes we must pay our fair share of taxes, and
for the services we get, we must join hands with Government and its
agencies to rid this country of the thieves and fraudsters who steal
from the public purse or from the poor. Let us cooperate with law
enforcement agencies to expose those who rob and abuse the
elderly, the indigent, the orphans, the disabled and the vulnerable. In
short, let us live as a community that supports itself with fairness,
equity and integrity; and that protects its weak and vulnerable.

36. Turning to the Expenditure side, the Government faced the greatest
challenge this year. The submissions from line ministries were two or
three times higher in some cases. Everything was urgent, everything
was important and everything was top priority. The Government then
decided on a set of four principles that have guided the formulation of
this Budget. These are to:-

 To preserve all the programmes that provide social welfare

protection to the poor, Continue free education and school
feeding; and, provide loan bursaries;

 To select those programmes and projects that will contribute

most to the creation of meaningful and permanent jobs,
especially for the youth;

 To select those projects and programmes that will maximize

revenue and create incomes for the people; and

 To select those projects and programmes that will strengthen

the institutions of policy formulation execution and monitoring
and those that fight fraud and corruption.

37. Applying these principles, it is proposed that Revenue for 2011/12

Fiscal year be set at M7,367,159,655.00 or M7.367 billion. This is
M1.026 above last year. It should be noted, however, that revenue
collection, contrary to Government directive last year, is very low.

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 LRA continues to exceed its targets in collections and this explains
why the Ministry of Finance and Development Planning is expected to
contribute M7.122 billion to the fiscus. The other main contributors to
revenue are: The Ministry of Natural Resources at M154.939 Million;
Home Affairs and Public Safety at M20.285 Million; Public Works and
Transport at M14.089 Million; Health and Social Welfare at M11.663
Million; Communications and Technology at M8.245 Million. The
remaining Ministries collected less than five Million Maloti. It is our
view in Finance and Treasury that with more public cooperation,
improvement in collection methods, better management and custody
of received revenues, the targeted figure for 2011/12 can be
exceeded.

38. With regard to Expenditure, the highest allocation has been made to
the Ministry of Education and Training at M1,843,516,691. This is in
line with the principles outlined above. It preserves Free Primary
Education which provides basic access to most primary school
children. Many of these would not have the opportunity to learn to
read or write due to poverty and loss of parents because of Aids. The
Ministry of Education and Training continues to build and expand
secondary schools and classrooms to accommodate more primary
school completers. This Ministry has also introduced a new Salary
Scale for Teachers which brings them more in line with the public
servants. This year it is providing to Teachers adjustments within this
scale. It is also taking over additional part of school feeding from the
World Food Program which is pulling out. M225 Million has been
allocated for school feeding and M54 Million for scholarships for
double and single orphans.

39. The second highest allocation goes to the Ministry of Finance and
Development Planning largely because of the NMDS. It was allocated
M595 Million for Manpower Loan Bursaries this year. This has been
increased to M717.5 Million in 2011/12. Clearly, these kinds of
increases are unsustainable, especially when few of these loans are
paid back. Government must therefore launch a serious dialogue
with parents, churches, schools, business, etc. to come up with an
affordable and sustainable programme of scholarships. In the
meantime, I appeal once more to all those who have not repaid their
loans to do so before their names are referred to the Credit Bureaus.

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 Madam Speaker

40. The details of proposed allocations to various Ministries can be found

in Annex IV of my speech. Allow me, therefore, to single out those
sectors and subsectors that provide a necessary foundation or
Minimum Investment Platform (MIP) for investment, economic
growth, employment generation, and infrastructure that link the whole
country together and provide people easy access to services.

National and Local Road Networks

41. During the last five years, Central and Local Governments have
made considerable investments in improving the quality of roads to
bitumen or hard gravel standards; in expanding the networks of urban
and rural roads and repairing and rehabilitating others. The proposed
budget allocations continue to provide for this programme. It has
provided for reconstruction of Oxbow-Mokhotlong roads, construction
of Mokhotlong-Sani-Top, completion of Likalaneng-Thaba-Tseka
road; design, through donor financing, of Thaba-Tseka-Taung-
Mokhotlong road; start of construction of Roma-Ramabanta-
Semonkong, across Senqunyane and Senqu Bridges to link with
Qacha‟s Nek-Quthing roads at Ha Sekake. M544.4 Million has been
allocated for upgrading of roads including bridges and footbridges in
the mountain areas. The Government Bonds will be used to finance
some of these roads in addition to donor grants and soft loans from
multi-lateral financial institutions and the Arab Funds for International
development of the Middle East.

Water Resources Development

42. Water is the source of life. Lesotho has always regarded it as its
“white gold” to support its people. The Government continues to

19
 attach top priority to this subsector. First, the Government is
continuing its programme of studies of the Lowlands Water Schemes
which will supply most of people with potable water and connections.
In this context, the proposed funds cover construction of Metolong
Dam, starting May, 2011; construction of rural water supplies which
the Right Honourable Prime Minister recently launched; and,
construction of urban water supplies for consumers and for industry.
It is important to note that the Government has allocated over M160
Million for urban and rural water supplies while our Development
Partners have provided in excess of M70 Million in grants and soft
loans in the amount of M480 Million. These donors include, among
others, the International Development Association, European
Development Fund, Irish Aid, Kuwait Fund for International
Development, South Africa, Millennium Challenge Corporation of the
U.S, OPEC Fund for International Development, BADEA, Saudi
Fund, European Investment Bank. Though there are many donors in
this subsector, the amazing thing is the level of coordination and
cooperation among them. This has made our work much easier. I
wish to thank and commend them all for their contributions to this vital
sector and for their success in implanting the Paris Principles of
Government Ownership of development programmes; Alignment of
Donor policies behind Government policies and procedures and
Coordination among Donors and the Government.

Energy and communications

43. Electricity is critical for household cooking, lighting and for driving
machinery that provides water. It runs industries and communication
systems. Government is therefore committed to increasing the
generation of power; expanding of the grid and the number of
household connections in the urban and rural areas. Towards this
goal it has allocated M373 Million and is negotiating with the private
sector to generate more power from the strong winds in the
mountains of Lesotho and from the hot sunshine that we have. The
Government plans to seriously address the issue of climate change
and clean technologies. The attraction of a global giant, Phillips

20
 Company, to locate in Lesotho and manufacture long life energy
saving bulbs is only a first step in this challenging field.

44. With regard to communications, the Government in line with all

African states, will change from Analogue to Digital in broadcasting
and video in the coming two years. Lesotho is also part of the Fiber
Optic project that provides undersea cable from the Horn of Africa
round the Cape. This will give our businesses and people high speed
connectivity. It will facilitate the transformation of the communication
sector as we embrace and build Broadband Technologies.

45. Diamond mining has become the highest contributor to GDP. In the
future Government plans to support the sector by providing
complementary infrastructure to mines at Kao, Liqhobong and
Mothae. The Government, in cooperation with the private sector, is
discussing plans to establish a diamond cutting academy, a diamond
bourse and jewellery hub. This will add value and beneficiation to our
diamonds and provide skills to our youth. Beyond this, Government
plans to undertake a geological survey of the whole country. It is
important to know definitively what lies below our beautiful mountains
besides diamonds. This calls for more of our students to study
geology and related disciplines connected with minerals and
materials.

Entrepreneurship Initiative and Small, Micro and Medium-sized

Enterprises (SMME)

Madam Speaker

46. Productive and sustainable jobs cannot be created in the public

sector. But government can facilitate and create conditions,
frameworks, institutions and facilities that will enable the private
sector to be a true engine of growth and creation of jobs especially for
the young people whom government plans to equip with skills that will
make them internationally competitive in product and labour markets.

21
47. In this context, Government has placed top priority on making
Lesotho competitive with other SACU members in terms of the time it
takes to register company, obtain licences, work permits, credit, asset
financing or leasing. We will use the Rankings provided by the
International Finance Corporation on “Doing Business” to set specific
targets to be achieved in the coming year. This, coupled with the
Minimum Infrastructure Programme for attracting investment, will
address the problems of SMMEs where most jobs can be created.

48. After reviewing many studies that have been done on “Obstacle or
Constraints to the Growth of SMMEs”, the Ministry of Finance and
Development Planning has decided to propose to Government an
Entrepreneurship Initiative aimed at young graduates, women and
other self-employed entrepreneurs. This is the establishment of a
Partial Credit Guarantee Fund which will be a joint initiative with
commercial banks. It is proposed that Government should capitalize
the Fund at M50 Million. The Fund will be under the supervision and
direction of an independent professional Board and Chief Executive.

49. Before accessing credit from the Fund, the applicants or groups will
undergo training on how to start and run a business successfully.
They will be taught how to prepare Business Plans and, as part of
their study, prepare their own business plans which will be taken to
the Bank for financing. The Fund will guarantee 70 percent of the
loan in case of failure and the banks will take the remaining 30
percent. It is expected that many young people will take advantage
and become their own employers.

50. Last year the Ministry of Finance and Development Planning

conducted a Pilot of this approach based on a Training Package
obtained from ILO, Zimbabwe. It trained about 850 pupils. The
results are promising. We will also approach the African Commission
on Growth and Employment for technical assistance.

22
 Financial Sector

51. The Government plans to strengthen the financial sector by

strengthening its supervision and regulation by the Central Bank,
especially control of Pyramid Schemes, Money Lenders, and
Insurance Brokers. It will also bring legislation to modernize and
update our life and insurance legislation in order to protect
consumers. Legislation to establish a Credit Bureau and to protect
the confidentiality of personal information supplied as part of credit
application is far advanced.

52. Finally the Government together with the Central Bank plans to
consolidate the issuing of Government Bonds and to establish a
market for their sale and purchases. This Bond market will be
followed immediately by the Stock Exchange. The two institutions
require sound legal and regulatory framework, good technical system
and well-trained staff. They involve use of public savings and
pensions.

Social Protection

53. As I have mentioned, protection of the vulnerable groups of our

society remains a priority of Government. But I have also indicated
that with the current financial difficulties faced by Government, there
now exists a squeeze on the extent to which assistance can be
extended to all that require it. Nevertheless, we have increased the
social protection budget by 7 percent from M564.5 Million to M605.8
Million.

23
 Local and General Elections

Madam Speaker

54. Before closing let me point out that the present Budget has provided
funds of Local Elections and for the National Elections under the IEC.
It has also provided for some small increases in the Budgets of the
Police, the Army and the Ministry of Local Government and
Chieftainship.

Estimates of Damage from Recent Rains and Floods

55. For the last two months, Lesotho has seen unprecedented rains,
floods and rock slides that have killed people, destroyed houses
washed away animals and crops. For over a week Maseru was
without water due to the flood damage to WASA machines at
Maqalika.

56. The Ministry of Public Works and Transport and the Disaster
Management Agency are still compiling reports on the extent of the
damage from these rains and floods. Once these reports are
complete I will come back to Parliament to report and propose a way
forward.

57. Although we have been hit hard by these floods, we nevertheless

wish to express our condolences and solidarity with the people of
Australia, Brazil and Pakistan who have had more than their share of
these floods.

Public Service, Service Delivery and Salaries

58. The share of public administration as a percentage of GDP has

increased rapidly from 2000/01 to 2009/10. It has increased faster

24
 than savings and investment of Government as percentage of GDP.
Clearly this is an untenable situation in the medium term. The
Government has therefore decided to restrict the growth of recurrent
Budget and to expand the growth of Capital Budget in real terms.
There will be cases and years when some minor deviations occur.
For this year, however, the policy remains true when one takes both
Capital and Recurrent Budget.

59. Notwithstanding this, the time has come when we must all learn to do
more, with less for the sake of our Country. The time has come for
public servants to change their attitudes towards their work and the
people they serve. It is these tax payers who pay their salaries.
Unless they deliver high quality services for which beneficiaries would
be willing to pay, there will be less and less money to pay their
salaries. Even more, there must be a change in the culture of using
government vehicles and property. Government has decided that
immediate changes and harsh penalties and dismissals be instituted
for those who misuse Government vehicles and steal and sell
Government petrol.

60. With regard to procurement we have tried many initiatives at the

suggestion of Chief Accounting Officers. We decentralized
procurement and increased the thresholds. We instituted training
courses. But, nothing solved the problems of fraud and corruption.
Instead, things became worse. I have now decided to explore the
route of an independent Board and incentives. For successes we will
even consider creation of the “Light Brigade” which they will create a
website in which to display cases of fraud and corruption that are
before the Courts.

61. Despite these, and considering the difficult budgetary environment for
this year, the Government has decided to make a start this year of
keeping the growth of public service at zero by freezing all new
positions. The funds so saved will then be used to increase the
salaries of the few who remain and who will be expected to do more.
In this context a 5 percent salary increase will be granted to all public
servants without increasing the overall deficit of 15 percent.

25
 Summary and Budget Administration

Madam Speaker

62. The revenue and expenditure proposals I have just outlined have
been framed within tough financial ceilings aimed at balancing the
imperatives of accelerating growth; creating jobs; protecting the weak
and vulnerable; building and repairing roads infrastructure; improving
Lesotho‟s international competiveness, transforming education and
training skills; providing increased access to health services; and,
supporting Youth entrepreneurship through access to training and
credit. There are complementary imperatives on the revenue side for
mobilizing more domestic revenues; removing waste; fraud and
corruption; paying our fair share of taxes; and, regenerating the spirit
of public service and common destiny.

63. The overall deficit of 15 percent of GDP will be strictly observed in

order to avoid plunging this country into bankruptcy and financial
chaos.

64. In terms of financing, the deficit will be financed by drawing down on

Government Deposits at the Central Bank. But these deposits or
foreign reserves cannot be reduced beyond a certain point because
they back the pegging of our currency, Loti, to the Rand. Therefore
the administration of this Budget does not allow much room for
deviations or misuse of Contingency.

Conclusion and Acknowledgements

Madam Speaker

65. Putting together the present Budget was not an easy task. It would
not have been possible without the strong support of the Right
Honourable the Prime Minister who took time to discuss with me key
priorities, strategies and recommendations. I appreciate your support

26
 and keen interest, Ntate, on the financial and economic issues of the
Budget.

66. The Honourable Deputy Prime Minister, Leader of the House and
Minister of Home Affairs and Public Safety spent long hours chairing
the Budget Committee and debating options with me, my colleagues,
and Senior Officials of the Ministry of Finance. Thank you, Ntate for
your keen insights and guidance.

67. To my Colleagues, Members of the Budget Committee, I appreciate

the seriousness with which you discharged your responsibilities. This
is what leadership is all about. We joked, laughed, discussed,
disagreed and in the end put the interests of Lesotho first. You asked
difficult questions and demanded scenarios from Senior Finance
Officials. They enjoyed your intellectual and practical policy decision-
making.

68. To all my Officials in the Ministry of Finance, whether spending hours

and nights in the Finance Boardroom, or running up and down to
generate data at Mid-night or banging away at laptop in response to
my tough demands, my sincere thanks. I have seen and appreciated
your professionalism and commitment to excellence and to this
Country. Keep it up.

69. For those Ministry Officials who have always been out in the District
to explain the Budget and answer questions and to the District
Administrators and the public and school children who have always
bombarded me with questions, my thanks and sincere appreciation.

70. To those who have created the power-points of the Budget and the
logistics that have carried this Budget across Lesotho and beyond,
many thanks. We are truly indebted to you.

71. To LRA and Nedbank, my thanks for always organizing a Budget

night where the Private Sector enjoyed criticizing my Budget and
“roasting” me, thanks. Other commercial banks have joined to
support Budget night too. Thanks.

72. To the Media, many thanks for your contributions and criticisms.

27
73. Finally, to you, Madam Speaker, thank you for your support and for
allowing this August House to be a Place where the destiny of our
Nation is decided.

KHOTSO! PULA! NALA!

28
 ANNEX I
GOVERNMENT BUDGET OPERATIONS FOR THE FISCAL YEAR 2011/2012 - 2013/2014
Projected
Outturn Budget Budget Budget Budget
Budget Item Outturn
2009/10 2010/11 2011/12 2012/13 2013/14
2010/11

REVENUE 9 554.7 8 183.5 8 906.2 10 038.3 12 115.2 12 561.9

Tax revenue 3 251.5 3 448.8 3 469.0 3 952.6 4 349.2 4 769.1
Taxes on income, profits, and capital gains 1 772.4 2 072.9 1 940.7 2 212.5 2 467.6 2 787.0
Income tax - payable by individuals 866.2 988.6 1 128.3 1 322.1 1 421.2 1 525.2
Income tax - payable by corporations and other enterprises 694.0 842.7 428.3 480.3 564.6 707.7
Income tax - unallocable 212.2 241.6 384.2 410.1 481.7 554.1
Taxes on property 95.7 89.9 100.0 106.1 119.8 132.4
Taxes on goods and services 1 289.0 1 182.4 1 401.1 1 600.7 1 710.2 1 790.2
Value-added tax 1 035.0 1 053.2 1 244.0 1 435.0 1 525.3 1 588.8
Excise taxes 242.7 119.0 131.9 152.2 170.4 186.3
Taxes on specific services 8.2 4.6 20.7 8.4 9.6 10.4
Taxes on the use of goods and on permission to use or perform activities 3.0 5.6 4.5 5.0 4.9 4.7
Taxes on international trade and transactions 90.3 96.2 26.1 30.8 48.2 56.5
Other taxes 4.2 7.4 1.1 2.4 3.3 3.0
Grants 693.4 1 809.1 1 498.4 2 414.5 2 480.3 2 249.6

Other revenue 691.7 763.7 1 310.9 918.6 998.7 1 063.0

Property income 128.6 143.5 640.3 196.3 219.9 242.4
Interest 7.4 7.5 7.5 7.5 8.0 8.2
Dividends 117.5 130.3 630.3 185.4 208.5 230.8
Rent 3.7 5.7 2.6 3.4 3.4 3.4
Sales of goods and services 502.2 580.5 615.2 670.2 719.7 764.2
Electricity Muela 94.3 109.7 102.4 118.2 132.3 144.7
Water Royalities - LHDA 336.6 388.1 435.9 463.3 488.0 511.0
Administrative fees 27.5 32.0 29.4 34.0 38.0 41.6
Incidental sales by nonmarket establishments 43.7 50.8 47.4 54.7 61.3 67.0
Fines & forfeits 6.5 6.5 7.0 7.4 7.8 8.1
Miscellaneous and unidentified revenue 54.5 33.1 48.4 44.7 51.3 48.3
SACU 4 918.0 2 161.9 2 627.9 2 752.6 4 287.0 4 480.1

EXPENSE (Statutory + Non Statutory + Salary Increase) -6 949.0 -6 675.0 -6 817.1 -8 008.8 -7 837.9 -8 346.5
Compensation of Employees -2 989.6 -3 048.3 -3 051.9 -3 632.5 -3 778.6 -4 077.2
Wages and salaries -2 527.3 -2 685.6 -2 570.7 -3 154.1 -3 271.9 -3 532.1
Employer contributions -462.3 -362.7 -481.2 -478.4 -506.7 -545.0
Use of goods and services -1 806.5 -1 767.3 -1 724.2 -1 864.6 -1 909.6 -2 017.1
Interest Payments -117.2 -105.7 -89.6 -240.5 -265.5 -290.5
Nonresidents -66.1 -63.5 -52.4 -73.7 -73.7 -73.7
Residents other than general government -51.1 -42.2 -37.2 -166.8 -191.8 -216.8
Subsidies -267.4 -204.4 -217.3 -95.8 -100.8 -105.7

Grants -607.2 -267.5 -548.4 -574.2 -604.3 -633.9

To foreign governments 0.0 0.0 0.0 0.0 0.0 0.0
To international organizations -13.4 -20.4 -18.5 -19.6 -20.6 -21.6
Extra Budgetary Units -363.5 -74.2 -290.7 -368.6 -388.0 -407.0
Local Government -230.2 -172.9 -239.2 -185.9 -195.7 -205.3
Social benefits -541.7 -573.1 -572.4 -604.8 -582.3 -595.6
Other expense -619.4 -708.8 -613.3 -996.4 -596.8 -626.6
Student Grants -588.0 -510.6 -595.1 -717.5 -575.8 -604.0
Other expense -31.4 -198.1 -18.2 -278.9 -21.0 -22.6
NON FINANCIAL & FINANCIAL ASSETS -111.9 -24.0 -42.6 -32.7 -34.4 -37.9

Capital Budget -3 022.3 -3 569.6 -3 351.7 -4 709.1 -5 261.7 -4 974.6

GoL -2 055.4 -1 688.9 -1 988.0 -1 615.0 -1 699.7 -1 782.8
Donor Grants -693.4 -1 379.1 -1 097.0 -2 324.5 -2 380.3 -2 149.6
Donor Loans -273.5 -501.6 -266.7 -769.6 -1 181.6 -1 042.2

CASH SURPLUS / DEFICIT -528.6 -2 085.1 -1 305.2 -2 712.3 -1 018.7 -797.2

% GDP -3.5% -12.6% -8.2% -15.0% -5.1% -3.7%
GDP 15 041.0 16 565.2 15 909.7 18 067.3 20 015.4 21 686.9

NET CASH INFLOW FROM FINANCING ACTIVITIES -159.4 2034.1 1221.7 2712.3 1018.7 797.2
FINANCIAL ASSETS 178.6 1765.9 1042.3 1457.0 -380.1 -272.1
Domestic 178.6 1 768.3 1 042.3 1 457.0 -380.1 -272.1
Foreign 0.0 -2.4 0.0 0.0 0.0 0.0
LIABILITIES -338.0 268.3 179.5 1 255.2 1 398.8 1 069.3
Domestic -357.5 5.6 -128.8 500.0 244.6 245.5
Securities -138.5 5.6 255.4 500.0 244.6 245.5
Loans -219.1 0.0 -384.3 0.0 0.0 0.0
of which Pension Liabilities -250.0 0.0 -338.1 0.0 0.0 0.0
Foreign 19.5 262.7 308.3 755.2 1 154.2 823.8
Loans 19.5 262.7 308.3 755.2 1 154.2 823.8
Disbursements 273.5 501.6 504.7 1 040.0 1 451.9 1 146.9
Repayments -254 -239.0 -196.4 -284.7 -297.8 -323.1
Statistical Discrepancy -688.0 -51.0 -83.5 0.0 0.0 0.0
Notes: (a) Captured by other categories of taxation in previous classification methodology.
 ANNEX II
REVENUES AND EXPENDITURES AS % GDP FOR FISCAL YEARS 2011/2012 - 2013/2014
Projected
Outturn Budget Budget Budget Budget
Budget Item Outturn
2009/10 2010/11 2011/12 2012/13 2013/14
2010/11
REVENUE 63.5 49.4 56.0 55.6 60.5 57.9
Tax revenue 21.6 20.8 21.8 21.9 21.7 22.0
Taxes on income, profits, and capital gains 11.8 12.5 12.2 12.2 12.3 12.9
Income tax - payable by individuals 5.8 6.0 7.1 7.3 7.1 7.0
Income tax - payable by corporations and other enterprises 4.6 5.1 2.7 2.7 2.8 3.3
Income tax - unallocable 1.4 1.5 2.4 2.3 2.4 2.6
Taxes on property 0.6 0.5 0.6 0.6 0.6 0.6
Taxes on goods and services 8.6 7.1 8.8 8.9 8.5 8.3
Value-added tax 6.9 6.4 7.8 7.9 7.6 7.3
Excise taxes 1.6 0.7 0.8 0.8 0.9 0.9
Taxes on specific services 0.1 0.0 0.1 0.0 0.0 0.0
Taxes on the use of goods and on permission to use or perform activities 0.0 0.0 0.0 0.0 0.0 0.0
Taxes on international trade and transactions 0.6 0.6 0.2 0.2 0.2 0.3
Other taxes 0.0 0.0 0.0 0.0 0.0 0.0
Grants 4.6 10.9 9.4 13.4 12.4 10.4
Other revenue 4.6 4.6 8.2 5.1 5.0 4.9
Property income 0.9 0.9 4.0 1.1 1.1 1.1
Interest 0.0 0.0 0.0 0.0 0.0 0.0
Dividends 0.8 0.8 4.0 1.0 1.0 1.1
Rent 0.0 0.0 0.0 0.0 0.0 0.0
Sales of goods and services 3.3 3.5 3.9 3.7 3.6 3.5
Electricity Muela 0.6 0.7 0.6 0.7 0.7 0.7
Water Royalities - LHDA 2.2 2.3 2.7 2.6 2.4 2.4
Administrative fees 0.2 0.2 0.2 0.2 0.2 0.2
Incidental sales by nonmarket establishments 0.3 0.3 0.3 0.3 0.3 0.3
Fines & forfeits 0.0 0.0 0.0 0.0 0.0 0.0
Miscellaneous and unidentified revenue 0.4 0.2 0.3 0.2 0.3 0.2
SACU 32.7 13.1 16.5 15.2 21.4 20.7
EXPENSE (Statutory + Non Statutory + Salary Increase) -46.2 -40.3 -42.8 -44.3 -39.2 -38.5
Compensation of Employees -19.9 -18.4 -19.2 -20.1 -18.9 -18.8
Wages and salaries -16.8 -16.2 -16.2 -17.5 -16.3 -16.3
Employer contributions -3.1 -2.2 -3.0 -2.6 -2.5 -2.5
Use of goods and services -12.0 -10.7 -10.8 -10.3 -9.5 -9.3
Interest Payments -0.8 -0.6 -0.6 -1.3 -1.3 -1.3
Nonresidents -0.4 -0.4 -0.3 -0.4 -0.4 -0.3
Residents other than general government -0.3 -0.3 -0.2 -0.9 -1.0 -1.0
Subsidies -1.8 -1.2 -1.4 -0.5 -0.5 -0.5
Grants -4.0 -1.6 -3.4 -3.2 -3.0 -2.9
To foreign governments 0.0 0.0 0.0 0.0 0.0 0.0
To international organizations -0.1 -0.1 -0.1 -0.1 -0.1 -0.1
Extra Budgetary Units -2.4 -0.4 -1.8 -2.0 -1.9 -1.9
Local Government -1.5 -1.0 -1.5 -1.0 -1.0 -0.9
Social benefits -3.6 -3.5 -3.6 -3.3 -2.9 -2.7
Other expense -4.1 -4.3 -3.9 -5.5 -3.0 -2.9
Student Grants -3.9 -3.1 -3.7 -4.0 -2.9 -2.8
Other expense -0.2 -1.2 -0.1 -1.5 -0.1 -0.1
NON FINANCIAL & FINANCIAL ASSETS -0.7 -0.1 -0.3 -0.2 -0.2 -0.2

Capital Budget -20.1 -21.5 -21.1 -26.1 -26.3 -22.9

GoL -13.7 -10.2 -12.5 -8.9 -8.5 -8.2
Donor Grants -4.6 -8.3 -6.9 -12.9 -11.9 -9.9
Donor Loans -1.8 -3.0 -1.7 -4.3 -5.9 -4.8

CASH SURPLUS / DEFICIT -528.6 -2 085.1 -1 305.2 -2 712.3 -1 018.7 -797.2

% GDP -3.5% -12.6% -8.2% -15.0% -5.1% -3.7%
GDP 15 041.0 16 565.2 15 909.7 18 067.3 20 015.4 21 686.9

NET CASH INFLOW FROM FINANCING ACTIVITIES -1.1 12.3 7.7 15.0 5.1 3.7
FINANCIAL ASSETS 1.2 10.7 6.6 8.1 -1.9 -1.3
Domestic 1.2 10.7 6.6 8.1 -1.9 -1.3
Foreign 0.0 0.0 0.0 0.0 0.0 0.0
LIABILITIES -2.2 1.6 1.1 6.9 7.0 4.9
Domestic -2.4 0.0 -0.8 2.8 1.2 1.1
Securities -0.9 0.0 1.6 2.8 1.2 1.1
Loans -1.5 0.0 -2.4 0.0 0.0 0.0
of which Pension Liabilities -1.7 0.0 -2.1 0.0 0.0 0.0
Foreign 0.1 1.6 1.9 4.2 5.8 3.8
Loans 0.1 1.6 1.9 4.2 5.8 3.8
Disbursements 1.8 3.0 3.2 5.8 7.3 5.3
Repayments -1.7 -1.4 -1.2 -1.6 -1.5 -1.5
Statistical Discrepancy -4.6 -0.3 -0.5 0.0 0.0 0.0
Notes: (a) Captured by other categories of taxation in previous classification methodology.
 ANNEX III
ANNUAL % CHANGE IN REVENUES AND EXPENDITURES
Budget Budget
Budget Item
2010/11 2011/12 % Change
REVENUE 8 183.5 10 038.3 22.7
Tax revenue 3 448.8 3 952.6 14.6
Taxes on income, profits, and capital gains 2 072.9 2 212.5 6.7
Income tax - payable by individuals 988.6 1 322.1 33.7
Income tax - payable by corporations and other enterprises 842.7 480.3 -43.0
Income tax - unallocable 241.6 410.1 69.8
Taxes on property 89.9 106.1 18.1
Taxes on goods and services 1 182.4 1 600.7 35.4
Value-added tax 1 053.2 1 435.0 36.3
Excise taxes 119.0 152.2 27.9
Taxes on specific services 4.6 8.4 84.3
Taxes on the use of goods and on permission to use or perform activities 5.6 5.0 -10.3
Taxes on international trade and transactions 96.2 30.8 -68.0
Other taxes 7.4 2.4 -66.9
Grants 1 809.1 2 414.5 33.5
Other revenue 763.7 918.6 20.3
Property income 143.5 196.3 36.8
Interest 7.5 7.5 -0.2
Dividends 130.3 185.4 42.3
Rent 5.7 3.4 -40.5
Sales of goods and services 580.5 670.2 15.4
Electricity Muela 109.7 118.2 7.8
Water Royalities - LHDA 388.1 463.3 19.4
Administrative fees 32.0 34.0 6.2
Incidental sales by nonmarket establishments 50.8 54.7 7.7
Fines & forfeits 6.5 7.4 13.1
Miscellaneous and unidentified revenue 33.1 44.7 35.0
SACU 2 161.9 2 752.6 27.3
EXPENSE -6 675.0 -8 008.8 20.0
Compensation of Employees -3 048.3 -3 632.5 19.2
Wages and salaries -2 685.6 -3 154.1 17.4
Employer contributions -362.7 -478.4 31.9
Use of goods and services -1 767.3 -1 864.6 5.5
Interest Payments -105.7 -240.5 127.6
Nonresidents -63.5 -73.7 16.1
Residents other than general government -42.2 -166.8 295.3
Subsidies -204.4 -95.8 -53.1
Grants -267.5 -574.2 114.7
To foreign governments 0.0 0.0
To international organizations -20.4 -19.6 -3.7
Extra Budgetary Units -74.2 -368.6 396.6
Local Government -172.9 -185.9 7.5
Social benefits -573.1 -604.8 5.5
Other expense -708.8 -996.4 40.6
Student Grants -510.6 -717.5 40.5
Other expense -198.1 -278.9 40.8
Capital Budget -3 569.6 -4 709.1 31.9
GoL -1 688.9 -1 615.0 -4.4
Donor Grants -1 379.1 -2 324.5 68.6
Donor Loans -501.6 -769.6 53.4
CASH SURPLUS / DEFICIT -2 085.1 -2 712.3
% GDP -12.6% -15.0%
GDP 15 909.7 18 067.3
 ANNEX IV
Ministry 2010/11 2011/12
Capital Budget Capital Budget
Recurrent Recurrent
Donor Donor Donor Donor
Budget Budget
GoL Grants Loans Total GoL Grants Loans Total
Agriculture and Food Security 144.4 41.0 0.0 15.0 56.0 144.2 10.4 0.0 13.0 23.4
Health and Social Welfare 800.6 250.3 203.3 39.0 492.6 1033.5 274.1 347.6 0.0 621.7
Education and Training 1487.0 58.4 113.2 10.0 181.6 1843.5 37.0 79.7 7.0 123.7
Finance & Development Planning 797.0 75.2 491.0 26.3 592.5 1077.4 104.3 1180.4 45.4 1330.1
Trade and Industry, Cooperatives & Marketing 52.2 24.0 20.4 0.0 44.4 46.8 34.0 17.4 75.7 127.1
Justice, Human Rights & Rehabilitation 199.5 19.7 0.0 0.0 19.7 190.2 28.0 0.0 0.0 28.0
Home Affairs & Public Safety 364.4 14.0 0.0 0.0 14.0 373.1 34.5 0.0 0.0 34.5
Prime Minister's Office 99.2 5.0 0.0 0.0 5.0 78.8
Communications, Science and Technology 75.9 32.0 0.0 0.0 32.0 71.9 105.0 0.0 50.0 155.0
Law & Constituitional Affairs 60.6 56.7
Foreign Affairs & Intern Relations 283.8 16.0 0.0 0.0 16.0 296.9
Public Works & Transport 184.1 386.0 163.8 76.1 626.0 163.4 352.2 75.3 97.9 525.4
Forestry & Land Reclamation 40.9 112.0 0.0 0.0 112.0 38.2 100.0 5.5 0.0 105.5
Natural Resources 74.9 156.4 319.0 335.2 810.6 137.5 171.2 568.5 480.7 1220.4
Labour & Employment 35.4 31.3
Tourism, Environment & Culture 53.2 34.5 0.0 0.0 34.5 53.8 26.4 0.0 0.0 26.4
Auditor General's Office 17.8 18.6 0.0 1.6 0.0 1.6
His Majesty's Office 6.6 20.0 0.0 0.0 20.0 5.8 20.0 0.0 0.0 20.0
Public Service Commission 5.2 5.1
Lesotho Highlands Development Authoity 79.0 0.0 0.0 79.0 5.0 10.0 0.0 15.0
Defence & National Security 349.6 15.0 0.0 0.0 15.0 349.9 24.5 0.0 0.0 24.5
National Assembly 50.7 68.2
Senate 12.6 12.7 1.0 0.0 0.0 1.0
Ombudsman 5.3 4.6
Independent Electoral Commission 27.4 285.0
Local Government & Chieftainship affairs 303.8 0.0 17.2 0.0 17.2 312.1 259.8 21.4 0.0 281.2
Gender, Youth, Sports & Recration 57.2 272.1 51.1 0.0 323.2 39.6 27.6 17.2 0.0 44.8
Public Service 23.0 78.2 0.0 0.0 78.2 22.0
Sub Total 5612.2 1688.9 1379.1 501.6 3569.6 6761.0 1615.0 2324.5 769.6 4709.1
Principal Repayment 239.0 284.7
Interest Charges 178.6 240.5
Pension & Gratuities 681.7 790.0
Statutory Salaries & Allowances 22.9 27.9
Subscriptions to International Organisations 20.4 23.2
Other 51.3
Administration Fund (Contingency) 100.0 83.0
Total 6906.1 1688.9 1379.1 501.6 3569.6 8210.3 1615.0 2324.5 769.6 4709.1
 ANNEX V
Expenditure by Ministry as % of Total - Capital and Recurrent
Ministry 2010/11 2011/12
Capital Budget Capital Budget
Recurrent Recurrent
Donor Donor Donor Donor
Budget Budget
GoL Grants Loans Total GoL Grants Loans Total
Agriculture and Food Security 2.09 2.43 0.00 2.99 1.57 2.11 0.64 0.00 1.69 0.50
Health and Social Welfare 11.59 14.82 14.74 7.77 13.80 15.10 16.97 14.95 0.00 13.20
Education and Training 21.53 3.46 8.21 1.99 5.09 26.94 2.29 3.43 0.91 2.63
Finance & Development Planning 11.54 4.45 35.61 5.24 16.60 15.74 6.46 50.78 5.90 28.25
Trade and Industry, Cooperatives & Marketing 0.76 1.42 1.48 0.00 1.24 0.68 2.11 0.75 9.83 2.70
Justice, Human Rights & Rehabilitation 2.89 1.17 0.00 0.00 0.55 2.78 1.73 0.00 0.00 0.59
Home Affairs & Public Safety 5.28 0.83 0.00 0.00 0.39 5.45 2.14 0.00 0.00 0.73
Prime Minister's Office 1.44 0.30 0.00 0.00 0.14 1.15 0.00 0.00 0.00 0.00
Communications, Science and Technology 1.10 1.89 0.00 0.00 0.90 1.05 6.50 0.00 6.50 3.29
Law & Constituitional Affairs 0.88 0.00 0.00 0.00 0.00 0.83 0.00 0.00 0.00 0.00
Foreign Affairs & Intern Relations 4.11 0.95 0.00 0.00 0.45 4.34 0.00 0.00 0.00 0.00
Public Works & Transport 2.67 22.86 11.88 15.18 17.54 2.39 21.81 3.24 12.72 11.16
Forestry & Land Reclamation 0.59 6.63 0.00 0.00 3.14 0.56 6.19 0.23 0.00 2.24
Natural Resources 1.08 9.26 23.13 66.82 22.71 2.01 10.60 24.46 62.46 25.91
Labour & Employment 0.51 0.00 0.00 0.00 0.00 0.46 0.00 0.00 0.00 0.00
Tourism, Environment & Culture 0.77 2.04 0.00 0.00 0.97 0.79 1.64 0.00 0.00 0.56
Auditor General's Office 0.26 0.00 0.00 0.00 0.00 0.27 0.00 0.07 0.00 0.03
His Majesty's Office 0.10 1.18 0.00 0.00 0.56 0.09 1.24 0.00 0.00 0.42
Public Service Commission 0.07 0.00 0.00 0.00 0.00 0.07 0.00 0.00 0.00 0.00
Lesotho Highlands Development Authoity 0.00 4.68 0.00 0.00 2.21 0.00 0.31 0.43 0.00 0.32
Defence & National Security 5.06 0.89 0.00 0.00 0.42 5.11 1.51 0.00 0.00 0.52
National Assembly 0.73 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00
Senate 0.18 0.00 0.00 0.00 0.00 0.19 0.06 0.00 0.00 0.02
Ombudsman 0.08 0.00 0.00 0.00 0.00 0.07 0.00 0.00 0.00 0.00
Independent Electoral Commission 0.40 0.00 0.00 0.00 0.00 4.16 0.00 0.00 0.00 0.00
Local Government & Chieftainship affairs 4.40 0.00 1.25 0.00 0.48 4.56 16.09 0.92 0.00 5.97
Gender, Youth, Sports & Recration 0.83 16.11 3.70 0.00 9.05 0.58 1.71 0.74 0.00 0.95
Public Service 0.33 4.63 0.00 0.00 2.19 0.32 0.00 0.00 0.00 0.00
Principal Repayment 3.46 4.16
Interest Charges 2.59 3.51
Pension & Gratuities 9.87 11.54
Statutory Salaries & Allowances 0.33 0.41
Subscriptions to International Organisations 0.30 0.34
Other 0.74 0.00
Administration Fund (Contingency) 1.45 1.21
Total 100.00 100.00 100.00 100.00 100.00 119.96416 100 100 100 100
 ANNEX VI
National Accounts
Percentage contribution to GDP

Industry FY 00/01 FY 01/02 FY 02/03 FY 03/04 FY 04/05 FY 05/06 FY 06/07 FY 07/08 FY 08/09 FY 09/10 FY 10/11 FY 11/12 FY 12/13 FY 13/14
Agriculture 11.4% 11.3% 9.3% 9.1% 8.7% 8.1% 7.3% 7.1% 7.4% 7.9% 7.8% 7.3% 7.0% 6.8%
Crops 4.8% 4.7% 3.8% 2.8% 2.4% 2.1% 2.2% 2.0% 1.8% 1.8% 1.7% 1.6% 1.6% 1.5%
Livestock 5.2% 5.2% 4.1% 4.9% 4.9% 4.7% 3.9% 3.9% 4.3% 4.9% 4.8% 4.5% 4.3% 4.2%
Services 0.7% 0.7% 0.6% 0.6% 0.6% 0.5% 0.5% 0.4% 0.5% 0.5% 0.5% 0.4% 0.4% 0.4%
Forestry 0.8% 0.7% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.7% 0.8% 0.8% 0.7% 0.7% 0.7%
Mining and quarrying 0.2% 0.2% 0.3% 0.7% 1.6% 3.7% 5.2% 7.7% 8.1% 6.1% 6.3% 6.6% 9.3% 10.1%
Primary industries 11.6% 11.5% 9.6% 9.7% 10.2% 11.8% 12.5% 14.9% 15.5% 14.0% 14.1% 13.9% 16.3% 16.9%
Manufacturing 14.1% 18.6% 20.6% 19.7% 19.5% 18.5% 19.1% 17.6% 17.0% 14.0% 13.8% 13.2% 12.9% 12.8%
Food products and beverages 3.3% 3.1% 3.3% 3.1% 2.8% 2.6% 2.6% 2.8% 2.7% 2.6% 2.6% 2.5% 2.4% 2.3%
Textiles, clothing, footwear and leather 9.1% 13.6% 15.5% 14.9% 14.9% 13.9% 14.4% 12.5% 11.6% 8.9% 8.4% 7.9% 7.6% 7.5%
Other manufacturing 1.7% 1.8% 1.9% 1.7% 1.9% 2.0% 2.1% 2.3% 2.6% 2.5% 2.7% 2.7% 2.8% 3.0%
Electricity and water 4.4% 4.2% 4.4% 4.3% 4.4% 4.8% 4.7% 4.2% 3.9% 3.8% 3.8% 3.7% 3.6% 3.6%
Electricity 1.2% 1.0% 1.0% 1.1% 1.2% 1.6% 1.5% 1.2% 1.0% 1.0% 1.1% 1.1% 1.1% 1.1%
Water 3.2% 3.2% 3.4% 3.2% 3.1% 3.2% 3.1% 3.0% 2.9% 2.8% 2.8% 2.6% 2.5% 2.5%
Construction 10.5% 8.0% 6.0% 5.6% 4.5% 4.4% 4.2% 4.0% 4.1% 4.5% 4.5% 4.8% 4.8% 4.8%
Secondary industries 29.1% 30.8% 31.0% 29.6% 28.4% 27.7% 28.0% 25.8% 25.0% 22.3% 22.1% 21.6% 21.3% 21.2%
Wholesale and retail trade, repairs 6.3% 6.4% 6.6% 6.6% 6.6% 7.0% 7.1% 7.1% 7.1% 6.2% 6.1% 5.9% 5.7% 5.5%
Hotels and restaurants 1.2% 1.2% 1.3% 1.3% 1.4% 1.3% 1.3% 1.2% 1.2% 1.2% 1.2% 1.1% 1.1% 1.0%
Transport, and communication 4.3% 4.5% 4.8% 4.9% 5.5% 6.0% 6.0% 5.8% 5.7% 5.7% 5.6% 5.5% 5.2% 5.0%
Transport and storage 2.6% 2.6% 2.7% 2.7% 2.9% 3.2% 3.0% 2.8% 2.7% 2.7% 2.6% 2.6% 2.4% 2.4%
Post and telecommunications 1.7% 1.9% 2.1% 2.1% 2.6% 2.8% 3.0% 3.0% 3.0% 3.0% 3.0% 2.9% 2.8% 2.7%
Financial intermediation 3.9% 3.8% 3.9% 4.2% 4.1% 4.4% 5.1% 6.1% 6.6% 6.7% 7.7% 8.4% 9.2% 10.2%
Real estate and business services 16.1% 15.4% 15.7% 15.2% 14.4% 13.9% 13.3% 12.5% 12.0% 12.0% 12.0% 11.5% 11.1% 10.9%
Owner-occupied dwellings 8.6% 8.4% 8.7% 8.7% 8.4% 8.2% 7.9% 7.5% 7.2% 7.1% 7.2% 6.8% 6.6% 6.6%
Other real estate and business services 7.4% 6.9% 7.0% 6.6% 6.0% 5.7% 5.4% 5.0% 4.8% 4.8% 4.8% 4.7% 4.5% 4.3%
Public administration 9.9% 9.8% 10.1% 10.5% 10.9% 10.8% 10.5% 10.2% 10.8% 13.1% 12.9% 13.6% 12.7% 12.5%
Education 8.7% 8.1% 7.9% 7.9% 8.0% 8.1% 7.9% 8.0% 8.6% 10.6% 10.4% 11.0% 10.3% 10.1%
Health and social work 2.1% 2.0% 1.9% 1.9% 1.9% 1.8% 1.8% 1.7% 1.7% 2.0% 2.0% 2.1% 1.9% 1.9%
Community, social and personal services 1.3% 1.2% 1.2% 1.2% 1.2% 1.1% 1.1% 1.1% 1.0% 1.0% 1.0% 0.9% 0.9% 0.9%
Tertiary industries 53.7% 52.3% 53.4% 53.8% 54.0% 54.4% 54.1% 53.7% 54.7% 58.4% 58.8% 60.0% 58.2% 58.1%
Financial services indirectly measured -0.9% -1.1% -1.2% -1.1% -0.8% -0.8% -1.1% -1.7% -2.1% -2.1% -2.4% -2.6% -2.9% -3.2%
All industries at producers' prices 93.5% 93.5% 92.8% 91.9% 91.9% 93.1% 93.5% 92.7% 93.1% 92.6% 92.6% 92.9% 92.9% 93.0%
Net taxes on products 6.5% 6.5% 7.4% 9.3% 10.7% 10.4% 10.5% 10.7% 10.2% 10.0% 10.0% 9.7% 9.6% 9.5%
Subsidies on products 0.0% 0.0% -0.2% -1.2% -2.6% -3.5% -4.0% -3.4% -3.3% -2.5% -2.6% -2.5% -2.5% -2.5%
GDP at purchasers' prices 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%