Lesotho must cut spending on govt wages to avoid slower growth

February 4, 2016 9:26 AM

"Containing the government wage bill - which at 23 percent of GDP is the largest in sub-Saharan Africa - will be central to a successful adjustment," said the IMF.

The International Monetary Fund (IMF) logo is seen at the IMF headquarters building during the 2013 Spring Meeting of the International Monetary Fund and World Bank in Washington, April 18, 2013. REUTERS/Yuri Gripas

The International Monetary Fund has urged Lesotho to sharply reduce government spending on wages, currently the highest in sub-Saharan Africa, to prevent growth slowing even further.

Lesotho's economic growth was likely to have slowed to 2.6 percent in 2015 from an average of 4.5 percent in the previous four years, the IMF said on Thursday in a report released at the conclusion of a visit to the country by its officials.

Growth would average between 2.5 percent and 3 percent in 2016, depending on the severity of a drought affecting southern Africa, the global lending body said.

The IMF warned the small mountain kingdom would experience a sharp and sustained fall in revenues from customs as the neighbouring economy of major trading partner South Africa slowed. Africa's most industrialised economy is expected to grow at only 0.9 percent in 2016, according to the central bank.