n AfricaGrowth Agenda - The implications of expenditure quality in small dependent members of SACU : the case of Lesotho

Volume 2011, Issue 1
  • ISSN : 1811-5187


The Southern African Customs Union (SACU) has its origins from 1910. Following the independence of the three states, Botswana, Lesotho and Swaziland (BLS) in 1966, a new agreement was signed in 1969. This agreement was renegotiated and signed in 2004 thereby incorporating more democratic principles in the management of the union. The revenue from the SACU pool has been a historical fiscal bulwark for the economy of Lesotho, supporting an enormous chunk of government expenditure. SACU has, recently been confronted by a number of challenges which have implications on the economy of Lesotho. First, the advent of global trade liberalisation meant that SACU countries had to begin to reduce tariffs in line with their commitments at the World Trade Organisation (WTO). Second, in an effort to enhance benefits arising from free trade, SACU member states engaged on a program to negotiate various trade agreements with other regional bodies. These efforts over the medium term would reduce the size of SACU revenue pool which relies on tariffs. Finally, the financial crisis and the subsequent global recession worsened the already vulnerable situation. It dampened demand for capital and consumer imports in the SACU region. This article begs the question: how has the government of Lesotho spent its revenue? Did the spending pattern prepare the economy for this eventuality of dwindling SACU revenue?

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