Overview

  • Overview

    Lesotho is a small land-locked country, completely surrounded by its neighbor South Africa. It has a population of about two million and a gross domestic product (GDP) per capita of $1,020. Lesotho is classified as a low-income country. Its territory is mostly highland with its lowest point sitting at 1,400m above sea level (making it the highest base altitude in the world).

    Previously a British protectorate, the nation gained its independence in October 1966. Lesotho is a constitutional monarchy that is ruled by a King as head of state and governed by a 33-member Senate and a 120-member National Assembly. In recent times, Lesotho’s political climate has been in flux with the country seeing its first coalition government after elections held in 2012. A snap election was held two years later in 2015 and another coalition government was formed after then Prime Minister Thomas Thabane prorogued parliament and advised the King to call fresh elections.

    Two years later, following a motion of no-confidence passed against Prime Minister Pakalitha Mosisili, the country is headed for another snap election that is due to take place in June, 2017.

    Economic growth

    Growth is estimated to have registered at 2.5% in 2016/17, due to drought and weak regional and global growth prospects. Although the mining sector is expected to contribute to growth in the near term, narrowing fiscal space will limit the contribution of the public sector to growth.

    Unemployment remains high at estimated levels between 24% and 28%. Although the headcount poverty rate (1.9 $/day PPP) fell from 61.3% in 2002 to 59.7%, estimates suggest that 56.2% of the population in 2016 still lived in extreme poverty. The slowness of poverty reduction goes hand-in-hand with high inequality, measured at 0.54 by the Gini coefficient.

    Lesotho’s fiscal space is narrowing due to a decline in Southern African Customs Union (SACU) revenues from 25% of GDP in 2014/15 to 13.6% of GDP in 2016/17, and is expected to remain low in the medium term. The debt-to-GDP ratio stands at 48% of GDP in 2016/17, and the projected sharp decline in SACU revenues calls for a substantial and sustained fiscal adjustment to protect debt sustainability and the peg with the South African Rand.

    The current account deficit of the balance of payments is estimated to have widened in 2016/17 with lower SACU revenues. Lesotho is facing a tough outlook with high current account deficits and lower SACU revenues to be able to finance the deficit. Fiscal consolidation is necessary for macroeconomic stability and higher growth in the medium to long term, despite the short-run negative impact on growth.

    Development Challenges

    The country finds itself at a crossroads requiring new engines for growth, a more streamlined role for the state, and a dynamic private sector to seize opportunities in the Southern African market. Public spending stands at 50% of GDP in 2016/17. At 18% of GDP, the high public wage bill is one of the highest in the world, and is the biggest contributor to the public spending. The level of public spending is unsustainable with the narrowing fiscal space and it cannot be solely relied upon to drive growth.

    With the second highest HIV prevalence rate in the world among adults, the government regards HIV/AIDS as one of its most important development issues, which it addresses through its HIV/AIDS National Strategic Plan. Between 1990 and 2005, life expectancy at birth declined from almost 60 years to 47 years, and currently stands at 49 years. HIV incidence is still high at 1.9 new infections per 100 person-years of exposure.

    Several factors hinder Lesotho’s private-sector growth, affecting both Foreign Direct Investment (FDI) and the growth of local businesses. All quantitative measures suggest that business regulations seriously constrain growth. Despite making progress in streamlining business and property registration and in establishing and operating a credit bureau, Lesotho ranks low on key Doing Business Indicators, such as dealing with construction permits, accessing finance, and the cost of capital. These are constraints on domestic entrepreneurship, suggesting that the domestic private sector remains dependent on the state and non-tradable sectors.

    Last Updated: Apr 25, 2017

  • Development Strategy: Lesotho’s vision

    The Lesotho government’s development goals are reflected in its “Vision 2020” and the National Strategic Development Plan (NSDP) approved in March 2012.

    World Bank Group Strategy

    The World Bank Group (WBG) completed a Systemic Country Diagnostic (SCD) in 2015.  It underpins the Country Partnership Framework (CPF) for 2016-2020.

    World Bank Group Portfolio

    The portfolio composition of Lesotho is made of a total of nine projects with a total commitment amount of $184.04 million of which about $69.02 million is disbursed.

    The projects are: the Lesotho Private Sector Competitiveness and Economic Diversification Project (PSCED-II), the Lesotho Education Quality for Equality Project, theWater Sector Improvement Project Phase II, the Lesotho Health Sector Performance Enhancement Project, the Public Financial Management Reform Project, theSouthern Africa Tuberculosis and Health Systems Support Project , the Smallholder Agriculture Development Project , the Public Financial Management Reform Project, and the Social Assistance Project.

    Last Updated: Apr 25, 2017

  • Transport Sector

    The Lesotho Integrated Transport Project, which came to a close in June 2015, aimed to enhance prospects for economic growth in Lesotho through the provision of an efficient and integrated transport system to improve access to services and market opportunities. Though the project, new bridges were built over the Senqu and Senqunyane Rivers. Construction of the bridges resulted in a new road, built by the Government of Lesotho, to connect the new South Eastern Corridor, which provides both easier and faster connections for communities in and around the Qacha’s Nek region of Lesotho to the country’s capital, Maseru.

    Education Sector

    The EFA Fast Track Initiative Catalytic Fund Grant for Lesotho was aimed at improving facilities at existing primary schools, contributing to the expansion of access to pre-primary education and to support improvements in the quality of teaching. The project came to an end in April 2015 with 143 new classrooms built and furnished and 140 pre-primary reception classes established. The reception classes allow over 3,600 children the opportunity to benefit from quality early childhood development education in preparation for primary school. Four hundred underqualified teachers also received a bursary to upgrade their qualifications, a move to retain qualified teachers in schools in remote mountainous area.

    HIV/AIDS

    The HIV and AIDS Technical Assistance Project aimed at building the capacity of government agencies and civil society at both the national and local level to address gaps in implementing the National HIV and AIDS Strategic Plan in an effort to contain and reverse the epidemic. This $5 million technical assistance project closed in June 2016, having supported high-priority capacity gaps, such as building civil society organizations’ organizational and technical ability to develop, resource, and manage HIV prevention and mitigation programs; strengthening supply chain management to improve HIV commodity availability; and district and community council efforts to mainstream prevention activities.

    HTAP also supported impact mitigation through the development of an Orphans and Vulnerable Children (OVC) adoption policy and guidelines, as well as the establishment of a new cadre of social workers, who are Auxiliary Social Workers trained in the identification, referral and follow-up of OVC.

    Last Updated: Apr 25, 2017

  • Partners in Lesotho include members of the diplomatic corps, consular missions, and international organizations. Presently there are four Embassies/High Commissions and nine international organizations, of which seven are from the UN family and the other two are the Delegation of the European Union and the World Bank.

    Development Cooperation is coordinated by the Ministry of Development Planning.

    Last Updated: Apr 25, 2017

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LENDING

Lesotho: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments


PHOTO GALLERY

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In Depth

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Africa's Pulse, No. 15, April 2017

Economic growth in Sub-Saharan Africa is projected to recover to 2.6 percent in 2017, following a marked deceleration in 2016.

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International Development Association (IDA) in Africa

IDA, the World Bank’s fund for the poorest, contributes nearly 50% of its funds to 39 African countries.

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World Bank Africa Multimedia

Watch, listen and click through the latest videos, podcasts and slideshows highlighting the World Bank’s work in Sub-Saharan Africa.

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Doing Business in Lesotho

The Doing Business Project provides objective measures of business regulations and their enforcement. See where Lesotho ranks on the "...

Additional Resources

Country Office Contacts

Main Office Contact
Lesotho Country Office
UN House
13 United Nations Road
Maseru 100, Lesotho
+266-2221-7000
Lesotho
Elita Banda
Communications Associate
+ 266-222-17000
ebanda@worldbank.org
Washington
Emmanuel Ngankam
Country Program Coordinator
1818 H Street, NW
Washington, DC 20433
+1-202-458-7654
enoubissie@worldbank.org