In
March 2004, the Government of Lesotho (GOL) launched universal
HIV/AIDS testing for citizens, but the first three dedicated
testing centres will only be operational by the end of April…
Introduction
Human immunodeficiency virus (HIV) was first detected in Lesotho
in 1986 and since then, the nation has experienced a dramatic
escalation in the HIV/AIDS pandemic in common with other
neighbouring countries in Southern Africa. According to the US
Agency for International Development (USAID), Lesotho has one of
the highest HIV/AIDS prevalence rates in the world at 31 per
cent. Nearly one in three Basotho adults aged 15-49 is now
infected with HIV. In 2001, life expectancy at birth was 38.6
years, almost half of what it was in 1990. It is tempting to
attribute this dramatic decline to the prevalence of HIV/AIDS.
Women in the country carry the greatest burden of this disease.
It is estimated that 38.1 per cent of women aged 15 - 49 years
have HIV infection, whereas the infection rate for men in this age
group is 17.4 per cent.
Economic impact
HIV/AIDS in Sub-Saharan Africa and in Lesotho, in particular, is
not just a health problem but also an economic issue. It can
reverse most of the development work that has been done since
independence and drive the region into extreme poverty. Its
effects on the economy of Lesotho can be analysed from both a
micro and a macro perspectives.
That is, firstly, how individuals and their households are
affected and, then, how this impacts on the whole economy.
Micro level
Expectedly, most of the negative implications of HIV/AIDS on
individuals and their households should become a serious issue
once a family member falls sick. Prolonged illness can induce
financial hardship in various ways. Firstly, a household may have
to increase its healthcare expenditure for the benefit of the
infected member. This may be particularly acute in Lesotho where
the use of medical aid schemes may not be so widespread. Secondly,
in extreme cases, inability to continue participation in
productive activities, such as employment and subsistence farming,
may worsen the situation. The prospect of a sick member being a
breadwinner or an important source of income can considerably
increase the level of suffering by a household. Thirdly, a
combination of rising healthcare costs and loss of income can in
some instances force families into unsustainable debt to meet
daily household needs. Fourthly, death and hence funeral services
imposes additional economic costs, which can further drain
resources available to households.
Furthermore, children from the affected families, some of whom are
likely to become orphaned, may be forced out of schools due to
financial difficulties. This may turn into a socio-economic
problem, in which social deprivation results in increased crime
while, at the same time, the country’s human resource capacity is
depleted. As explained later on, this may also have a bearing on
Government resources.
Macro level
Through
aggregation, the micro effects translate into a macro scale in a
number of ways. First, the HIV/AIDS pandemic has adverse
implications for the private sector both at the individual
entities’ and national levels. These effects could come in the
form of costs associated with increased absenteeism due to
illness, recruitment and training of replacement workers.
Absenteeism induced by prolonged illness may result in reduced
production and increased unit labour costs, which may in turn
impinge on turnover and profits. In some cases, an escalation of
medical expenditure may force firms to increase medical aid
contributions for their employees. Furthermore, a rise in the rate
of incapacitation or morbidity is likely to hurt the private
sector through its impact on staff turnover, as business
enterprises recruit and train new personnel. A combination of
lower profit margins and increased costs on recruitment and
training of personnel has the potential to discourage investment.
This does not augur well for the development of the country and
the Government’s poverty reduction efforts.
Second, by increasing the mortality rate, HIV/AIDS will reduce the
country’s labour force. As already mentioned, the infection rate
is very high within the most productive section of the population.
Since this directly affects the country’s productive capacity, it
has the potential to lower the country’s economic growth rate and
output, and thereby hinder its development prospects. In addition,
this may increase the dependency ratio, that is, the number of the
elderly, the sick and children to be supported by the active
labour force. This could in turn reduce the national saving rate
and thus funds available to finance capital expenditure in the
country.
Third, high prevalence of HIV/AIDS is likely to strain government
resources in various ways. In the first place, the Government may
have to increase funding for public health to cater for the AIDS
patients. In addition, as the disease raises the number of
orphans, this will increase the demand for Government support for
education. At the same time, as the pandemic pushes some
households into poverty, the Government may be forced to divert
funding from other projects in order to provide financial
assistance to the affected families. This can negatively affect
the fiscal balance and thereby the development of the country.
Meanwhile, the disease has the potential to reduce the
Government’s revenue base. As part of the labour force loses its
income earning ability due to morbidity or mortality, personal tax
revenue payable to the Government will also decline. Furthermore,
the potential loss of profitability by private businesses as a
result of decreases in productivity, combined with increases in
staffing related costs, could reduce corporate tax revenue. In the
end, the decline in tax revenue will affect the fiscal balance and
limit the Government’s delivery of services and its ability to
mitigate the impact of HIV/AIDS on the country’s economy.
National response
The
Government of Lesotho has declared HIV/AIDS a national disaster
and set a goal of cutting the adult prevalence rate from 31 per
cent to 25 per cent by 2008. In 2002, the Parliament approved a
multi-sectoral National AIDS Strategic
Plan, which calls for coordination of all HIV/AIDS activities by
Government ministries, district offices, donor agencies,
non-governmental agencies, the private sector, churches and
traditional healers. Consequently, the Lesotho AIDS Programme
Coordinating Authority (LAPCA) was established to coordinate
nation-wide activities. It was also announced that 2 per cent of
total Government expenditure would be devoted to the
implementation of the National AIDS Strategic Plan.
In
late 2002, Nevirapine, which is used
to prevent mother-to-child transmission of HIV, was introduced.
However, there is a need to improve distribution and use of this
drug. In July 2003, the GOL hosted the Southern African
Development Community (SADC) Heads of State Summit on HIV/AIDS.
The summit was preceded by Non-Governmental Organisations’ (NGOs)
Forum that submitted useful recommendations to the Summit. The
Heads of State Summit adopted a new SADC HIV/AIDS Strategic
Framework and a Programme of Action, 2003 - 2007. The member
states committed themselves to accelerate the fight against the
pandemic with a focus on access to care, testing and treatment,
prevention and education, social mobilisation, access to
anti-retroviral drugs, resource mobilisation, and monitoring and
evaluation.
In
line with this regional effort, the GOL aims to design a
cost-effective plan by June 2004 to provide anti-retroviral drugs
to the population at affordable prices. In March 2004, universal
HIV/AIDS testing for citizens of Lesotho was launched, but the
first three dedicated testing centres will only be operational by
the end of April. The Government’s goal is to have testing
facilities available at all the 18 hospitals in the country.
The
international donor community is also providing valuable support
to the Basotho nation in the fight against HIV/AIDS. At the
forefront of donor assistance is the Geneva-based Global Fund,
which is donating US$34 million to be spent on HIV/AIDS and
Tuberculosis (TB) Programmes for five years. The first
disbursement of this grant, amounting to US$12.5 million, has
already been released. Other donors in this regard include but are
not limited to the Irish Government, the United Kingdom’s
Department for International Development (DFID) and the United
States. Efforts are underway for the World Bank to assist Lesotho
to strengthen the national capacity in order to make effective use
and account properly for the use of these funds.
Conclusion
As
discussed, HIV/AIDS can have a devastating impact on the economy
of Lesotho. Among others, prolonged illness can force households
into poverty. Through increased absenteeism, it can affect
productivity and thereby private sectors’ profits. A rise in
morbidity and mortality can also reduce the country’s productive
capacity and thus future growth. This will negatively affect
economic growth. In addition, the pandemic has the potential to
strain government resources by reducing the tax base and
increasing the demand for social support.
Combating HIV/AIDS, malaria and other diseases is one of the eight
Millennium Development Goals (MDGs)
devised by the United Nations. In Lesotho’s case, efforts should
be intensified in the fight against HIV/AIDS, in particular. This
pandemic could reverse the country’s developmental performance.
The Government should be applauded for efforts in the fight
against this disease and should be encouraged to persevere.
However, there is a limit to what the Government can achieve on
its own. It can provide resources and leadership but should be
complemented by a collaborative effort by non-governmental
organisations (NGOs), community-based organisations and the public
at large. Basotho, as a nation, need to
fully de-stigmatise the HIV/AIDS infection in order to effectively
combat this disease.
Table 1.
Monetary and Financial Indicators+
|
|
2003 |
2004 |
|
|
Dec |
Jan |
Feb |
|
1. Interest rates (Percent Per Annum) |
|
|
|
|
1.1 Prime Lending rate |
12.50 |
12.50 |
12.50 |
|
1.2 Prime Lending rate in RSA |
12.00 |
11.5 |
11.5 |
|
1.3 Savings Deposit Rate |
2.00 |
2.41 |
2.31 |
|
1.4 Interest rate Margin( 1.1 – 1.3) |
2.00 |
10.09 |
10.19 |
|
1.5 Treasury Bill Yield (91-day) |
10.57 |
9.21 |
9.21 |
|
|
|
|
|
|
2. Monetary Indicators (Million Maloti) |
|
|
|
|
2.1 Broad Money (M2) |
2297.9 |
2217.9 |
2279.1 |
|
2.2 Net Claims on Government by the Banking System |
-167.0 |
-386.4 |
-371.9 |
|
2.3 Net Foreign Assets – Banking System |
3460.7 |
3699.4 |
3845.7 |
|
2.4 CBL Net Foreign Assets |
2853.0 |
3188.1 |
3055.9 |
|
2.5 Domestic Credit |
380.6 |
171.6 |
30.1 |
|
2.6 Reserve Money |
364.9 |
333.6 |
325.50 |
|
|
|
|
|
|
3. Spot Loti/US$ Exchange Rate (monthly average) |
6.500 |
6.963 |
6.6618 |
|
|
|
|
|
|
4. External Sector (Million Maloti) |
2003 |
|
Q2 |
Q3 |
Q4 |
|
4.1 Current Account Balance |
-304.8 |
-300.6 |
-299.8 |
|
4.2 Capital and Financial Account Balance |
319.3 |
155.5 |
320.0 |
|
4.3 Reserves Assets |
-0.8 |
391.7 |
-156.6 |
Table 2.
Selected Economic Indicators
|
|
2000 |
2001 |
2002* |
2003+ |
|
1. Output Growth( Percent) |
|
|
|
|
|
1.1 Gross Domestic Product – GDP |
1.3 |
3.2 |
3.8 |
3.3 |
|
1.2 Gross Domestic Product Excluding LHWP |
0.0 |
3.5 |
3.3 |
3.2 |
|
1.3 Gross National Product – GNP |
-3.2 |
0.6 |
2.5 |
2.7 |
|
1.4 Per capita –GNP |
-5.0 |
-1.7 |
2.1 |
2.2 |
|
|
|
|
|
|
|
2. Sectoral
Growth Rates |
|
|
|
|
|
2.1 Agriculture |
2.9 |
0.6 |
-4.0 |
-0.4 |
|
2.2 Manufacturing |
4.4 |
7.9 |
6.9 |
5.0 |
|
2.3 Construction |
9.7 |
1.3 |
6.9 |
4.0 |
|
2.4 Services |
-0.9 |
2.2 |
3.3 |
3.6 |
|
|
|
|
|
|
|
3. External Sector – Percent of GNP
Excluding LHWP |
|
|
|
|
|
3.1 Imports of Goods |
71.9 |
74.9 |
87.3 |
80.6 |
|
3.2 Current Account |
-8.8 |
-2.9 |
-8.6 |
-7.8 |
|
3.3 Official Reserves ( Months of Imports) |
8.9 |
11.7 |
6.4 |
5.5 |
|
|
|
|
|
|
|
4. Government Budget Balance (Percent of
GNP) |
-4.9 |
-1.0 |
-2.7 |
-2.5 |
*Preliminary Estimates +Projections
