Overview

Lesotho is a small landlocked country, completely surrounded by the Republic of South Africa. At 30,000 sq. km., the country is just about the size of Burundi, with a population of about two million. Lesotho’s highlands constitute two-thirds of the country’s territory; less than 10% of which is suitable for cultivation.

Lesotho became independent in 1966. As a constitutional monarchy, Lesotho is ruled by a king and governed by a 33-member Senate and a 120-member National Assembly. During mid June 2015, the coalition government faced its greatest political challenge since its formation in June 2012, as disagreements amongst key coalition partners led to the suspension of parliament by the Prime Minister, thereby raising concerns about the ability of government to manage the legislative agenda to support its economic programs. The Southern African Development Community (SADC) led peace mediation efforts to resolve the current political impasse in Lesotho. This led to preparation of snap elections which resulted in parliament being closed in December 2014 and general elections taking place in February 28, 2015.

The results of the 28th February 2015 election brought another coalition government, as no party came with the results to form a new government on its own. The new coalition is made of seven political parties namely, Democratic Congress (DC), Lesotho Congress for Democracy (LCD), Patriotic Front for Democracy (PFD), Maramatlou Freedom Party (MFP), Basutoland Congress Party (BCP), Lesotho Peoples’ Congress (LPC), National Independent Party (NIP).  The new coalition government controls 65 seats out of 120 parliamentary seats.

Economic growth

In FY2015/16 real gross domestic product (GDP) growth is expected to pick up to 4%, driven primarily by mining production, construction and government services. This figure has been revised downward from our 4.9% projection last October. In FY2014/15, GDP fell to a projected 1.8% due mainly to continuing political uncertainties, a slowdown in manufacturing and an under execution of public investment. The agriculture sector contracted because of loses in crop production due to early frost and heavy rains. The manufacturing sector contracted because Philips light bulb factory and three textile firms closed in early 2014, and three major US wholesale buyers canceled their textile orders due to continuing political uncertainties. In addition, the South African economy has slowed down and has contributed negatively on manufacturing exports, foreign direct investments (FDI) and remittances. Due to the difficult political situation, there has been an under-execution of public investment so its contribution to GDP this year was smaller than expected.

Unemployment stood at 24% in 2008 and is unlikely to have changed much, even as underemployment and low productivity employment is widespread, especially in rural areas. Recent unemployment data is not yet available. Preliminary government estimates based on the 2010/11 Household Budget Survey show that the national poverty head count rate stood at 57.1% and the Gini Coefficient based on consumption stood at about 0.53. Poverty has decreased in urban areas, while poverty has increased in rural areas.

In the last nine years, Lesotho’s manufacturing sector’s relative contribution to GDP declined from 20.1% in 2004 to 10.8% in 2013 as a result of stagnation in the textile and garments sector, due to the global economic crisis and the rapid growth in other sectors, notably mining. Textile producers have struggled in recent years to compete with low-cost Asian producers. They have been further hampered by a strong exchange rate and by withdrawal of the Southern African Customs Union (SACU) duty rebates for imported raw materials. The Lesotho loti is pegged at par to the South African rand, which is also a legal tender in the country.

The fiscal situation continues to deteriorate. Driven by public spending increases, the non-SACU) fiscal deficit increased from 25.2 percent of GDP in FY2012/13 to 31 percent of GDP in FY2013/14. In FY2014/15, the Non-SACU fiscal deficit is projected to decline to 29 percent of GDP, largely because of low public capital spending.

Development Challenges

The country finds itself at a crossroads requiring new growth engines, a more streamlined role for the state, and a dynamic private sector to seize opportunities in the Southern African market. Public spending grew from 45% of GDP in FY2004-05 to about 63% in FY2011-12, one of the highest ratios in the world. This level is unsustainable, and public spending can no longer be relied upon to drive growth. The effectiveness of public spending has also been low, weakening its impact on growth and social outcomes. The fiscal consolidation needed to strengthen fiscal and external sustainability would weigh on future growth, especially if not matched by greater effectiveness of spending and service delivery institutions. Now, the impetus for growth has to come from the private sector, which at the moment is small and weak, having insufficiently absorbed the benefits of public expenditure programs and investments. In addition, Lesotho will need to attract FDI - in particular, investment coming from new sources (such as South Africa), flowing into new sectors (with emphasis on low-skilled production), and putting a greater focus on the South African market.

Economic growth has not been adequately inclusive, resulting in high concentration of poverty in rural areas, persistent high levels of inequality, and widespread unemployment. Unemployment stood at 24% in 2008, among the highest in the world. Only 230,000 of the 608,000 employed people engage in formal wage employment. The rest are in informal activities, and they are often paid in-kind. Preliminary Government’s estimates based on the 2010-11 Household Budget survey show that the national poverty head count rate stood at 57.1% and the Gini Coefficient based on consumption stood at about 0.53. Both these figures are virtually the same as those obtained in the 2002-2003 Household Budget survey. However, by comparing the 2002/03 figures with those from 2010-11, poverty has decreased in urban areas while poverty has increased in rural areas. Poverty is concentrated in rural areas that, despite poor soil quality and rainfall, remain home to about three quarters of the population, indicating underutilization and misallocation of labor resources. The critical challenges of inclusive growth, a sustainable and effective public sector, and access to quality service delivery define Lesotho’s core development agenda.

The Lesotho government regards HIV/AIDS as one of its most important development issues, and the government is addressing the pandemic through its HIV/AIDS National Strategic Plan (NSP). Lesotho has the third highest HIV rate among adults in the world, at 23.6%. Life expectancy at birth has declined by more than 20 years to 41 years over the past decade. In 2011, annual new infections were estimated at 17,500.

According to UNAIDS 2012 estimates, 360,000 people are living with HIV, 38,000 of them children. Lesotho has a continuously growing number of Orphans and Vulnerable Children (OVC). There are more than 200,000 OVC, 68% of which are AIDS orphans. Overall, coverage of some key HIV/AIDS interventions has improved, including prevention of mother-to-child transmission (PMTCT) and antiretroviral therapy (ART). PMTCT coverage increased from 31% in 2007 to 78% in 2011. ART rollout has made good progress with 61% of the estimated HIV-positive population receiving ART in 2011, a total of 83,624 adults and children.

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. In 2002, Lesotho issued “Vision 2020” to articulate its long-term strategic priorities so that by 2020: “Lesotho shall be a stable democracy, a united and prosperous nation at peace with itself and its neighbors. It shall have a healthy and well developed human resource base, a strong economy, a well-managed environment and an established technological base.”

Prime Minister Thomas Thabane has continued to re-affirm the commitment of government to the strategic direction and economic development program articulated in the Vision 2020 and the National Strategic Development Plan (NSDP) documents. The NSDP, which serves as the implementation strategy for the National Vision 2020, re-affirms the government’s commitment to the objectives of fiscal consolidation, economic diversification, infrastructure and human development. The NSDP sets the following strategic goals; pursue high, shared and employment generating economic growth, develop key infrastructure, enhance the skills base, technology adoption and foundation for innovation, improve health, combat HIV and AIDS and reduce vulnerability, reverse environmental degradation and adapt to climate change, and promote peace, democratic governance and build effective institutions.

Last Updated: Apr 16, 2015

The World Bank Group’s (WBG) Country Partnership Strategy 2010-2014 (CPS) has come to an end, and the WBG has recently completed the Systemic Country Diagnostic (SCD) to underpin the new Country Partnership Framework (CPF) scheduled for delivery in beginning of FY2017. The WBG and the government are currently discussing a set of operations prioritized around the twin goals that would shape the new CPF. However, the preparation of the SCD and the CPF may be postponed, given the prevailing political situation in Lesotho.

World Bank Group Portfolio

The pace of implementation of the program has improved and major portfolio issues have been resolved over the last fiscal year. As of September 25, 2014, the portfolio comprised eight IDA-funded projects with total commitment amount of $157.6 million; of these $80 million are disbursed (48% disbursement rate). In FY14 the portfolio disbursed $31.5 million. The weak implementation capacity and lack of implementation readiness of some new projects are the main factors impeding higher disbursement rates. The bulk of International Development Association (IDA) financing is for infrastructure development; transport, water, finance and urban development.

IDA is also funding projects in the social sector of the economy, health, HIV/AIDS, private sector development and agriculture (in cooperation with the International Fund for Agricultural Development (IFAD). IDA has also been providing direct budget support to the Lesotho government through the Programmatic Growth and Competitiveness Development Policy Operation series (DPO). The DPO series supports the economic and governance reform efforts of the government by creating the enabling environment and the right policy framework for the successful implementation of the National Strategic Development Plan.

The IDA portfolio is supplemented by several grants. A trade facilitation grant agreement was signed with the Lesotho, which will help to stimulate trade with South Africa – Africa’s largest economy – by streamlining border procedures. It will also increase economic competitiveness and attract investments, providing Lesotho with land-linking opportunities that are critical for achieving job-creating growth. A multi-donor Global Partnership for Education (GPE, formerly Education for All Fast-Track Initiative Catalytic Fund Grant administered by IDA supports primary education, by building schools in rural areas, providing rural teacher incentives, training and textbooks, and supporting pre-primary reception classes.

International Financing Cooperation (IFC) is acting as lead transaction advisor on four Public Private Partnership in Infrastructure (PPP) projects for Lesotho. These transactions include developing PPP projects for facilities management, ICT and telemedicine in 168 public health facilities, developing PPP for health care waste management, development of five tourism PPP projects, development of PPP framework for tourism sector and streamlining the tourism licensing process; and to undertake feasibility study of three wind energy sites in Lesotho, and if feasible, to package these as PPPs for development and financing by a private operator. The Multilateral Investment Guarantee Agency (MIGA) is not active in Lesotho.

Analytical and Advisory Services will continue to be the bedrock of IDA and IFC investment and policy dialogue with government. These knowledge products will help set the stage for developing the main themes of the next CPF.

Last Updated: Apr 16, 2015

Private Sector Development

The Lesotho Private Sector Competitiveness and Economic Diversification Project has been the principal instrument to provide to private sector development. Approved in 2007 and closed successfully in June 2013, the project supported the government on a range on issues that helped 

  • improve the business environment and access to infrastructure and basic services,
  • develop the financial system and promote access to finance
  • promote the creation of a strong, dynamic, competitive, and innovative private sector and,
  • promote the priority sectors, broadening entrepreneurship, and creating jobs (including in agriculture, tourism and manufacturing)

There has been substantial progress made on business environment reforms and improving economic diversification. As part of the project, the Companies Act was prepared and implemented in May 2012, the first since 1967. The Act finalized company regulations and supported the successful launch of the company registry. The amendment of trading enterprises regulations approved and became operational in April 2012. The Industrial Licensing Bill has been drafted and presented to Parliament for approval. The Financial Institutions Act, which includes legislation on leasing, has been passed.

With a view to diversify the economy, the project has supported two Skills Development Centers to help train unemployed workers demonstrating that unskilled workers can be employed through training. These skills centers are now under a Public Private Partnership arrangement. Further, the horticulture pilots have proved that high quality fruit yields can be produced in rural Lesotho with a harvest season that is a few weeks earlier than South Africa, implying promising price advantages for Lesotho fruit exports. Achievement in supporting the tourism industry includes the establishment of the World Hotel Link (WHL) online reservation portal, which has 28 tourism establishments and the participation of two tour operators, as well as support to the Lesotho Tourism Development Corporation (LTDC) on tourism promotion and marketing, adoption of a tourism concessions manual and helping to facilitate concession contracts for major tourism assets. Finally, the Lesotho Enterprise Assistance Program (LEAP) matching grant scheme has supported 168 firms and private sector associations. Most of the beneficiary firms reported substantial growth in sales and employment. To build on the reforms initiated under the PSCED Project, a follow on project was approved on October 31, 2013. The Project Financing Agreement was signed between Government of Lesotho and the World Bank Group (WBG) and the project became effective on January 9, 2014. This $13.1 million Second Private Sector Competitiveness and Economic Diversification Project (SPSCEDP) aims at supporting the government’s strategy by;

  • improving business environment
  • increasing access to finance
  • supporting investment promotion in new sectors with increased backward linkages to the local economy and
  • targeted support to new growth sectors such as horticulture and tourism that have tremendous potential for job creation and poverty alleviation

Education

Lesotho’s education system has achieved substantial gains in recent years, but much remains to be done. After introducing free primary education in 2000, the primary net enrollment rate (NER) rose from 60% in 1999 to 81% in 2006, among the highest in Sub-Saharan Africa. However, it has remained stagnant at that level for the past few years. At the same time, Lesotho has achieved gender parity in primary education. Approximately 49% of primary school students are male and more than 50% of secondary school students are female. The transition rate between primary and lower secondary education is also high, with 81% of primary students advancing to secondary education. Learning outcomes as measured by the Southern and Eastern African Consortium for Monitoring Education Quality (SACMEQ) results are below the average in the sub-region, but have begun to improve: over the 2000-2007 period, SACMEQ reading scores rose from 451 to 468 and math scores from 447 to 477.

Lesotho has also made advances in other areas such as in Early Childhood Development (ECD) with the establishment of 240 pre-primary reception classes for the poorest children and training of care givers. Enrollment in secondary education has increased with the construction of 20 new secondary schools (in 2009 and 2010) and the establishment of combined primary and secondary schools. Lesotho is now focusing on improving the quality of basic education through introduction of a new curriculum for early grade reading and math, while focusing on a skills development agenda for post-basic education levels. The new education sector plan 2015-2020 under preparation is expected to focus on skills development.

For the past four years, the WBG has been working closely with the Global Partnership on Education (GPE), Irish Aid, and the local donor group to improve in-country donor harmonization. As part of this harmonization effort, the Education Sector Strategic Plan 2005-2015 was updated in 2009 and Lesotho benefited from a (the third) GPE Fund grant, with the WBG as supervising entity for the grant implementation The funds from this grant are pooled with a $6.8 million grant from Irish Aid, which created the first pooled fund in the education sector in Lesotho. This project includes an impact evaluation of a teachers’ incentive scheme which data has just been collected. The Bank has also carried out two surveys on education, skills and employability (household and employers surveys) and prepared a report on education, skills development and equity, which summarizes the findings of the surveys. The report is expected to contribute to the revision of the education sector plan and for further reform in post-basic education.

Water Sector

Water is one of Lesotho’s most important renewable assets and central to the country’s long-term growth prospects. The sector contributes roughly eight% to the overall gross domestic product (GDP), a large portion of which is derived from revenues associated with the Lesotho Highlands Waters Project (LHWP). This will increase with development of Phase 2 and construction of the Polihali Dam, associated water transfer infrastructure and the Kobong pump storage scheme.

Phase 2 was officially launched on March 27, 2014, includes provision for augmenting the water transfer to South Africa through construction of a new dam and transfer tunnel, and the development of a pump storage scheme to generate electricity for the benefit of Lesotho. The sharing of benefits under the LHWP is based on the lower cost of the project compared to alternatives in South Africa. The benefits are split between Lesotho (56%) and South Africa (44%), with South Africa saving on the lower cost and Lesotho benefitting from royalties, ancillary developments and hydropower. Royalties are based on a fixed portion paid over 50 years reflecting the lower capital cost for full delivery of 70 m3/s compared to the alternative Orange-Vaal Transfer Scheme and a variable portion due to the lower operation and maintenance, and electricity costs based on the volume of water delivered. Under Phases 1A and 1B water transfers are currently 18m3/sec and 12m3/sec of water.

The WBG continues to support the process toward implementation of the LHWP through analytical work. The LHWP is one of the world’s most ambitious water transfer projects. Support to the Lesotho government dates back to the 1980’s, when the WBG was the executing agency on behalf of the government for United Nations Development Programme-financed design studies. Since then the WBG has provided $165 million in support of the LHWP, including through the Lesotho Highlands Water Engineering Project (1986), which assisted the government in the design and preparation of the LHWP, and two loans for Phase 1A and 1B of the LHWP. Total revenues from water sales since November 1996 amount to over $400 million with an additional $90 million in electricity sales to the Lesotho Electricity Company and another $1 million in sales to Eskom.

The WBG has also supported the government in its effort to capitalize on the development opportunities afforded by the countries abundance of water, high altitude and a geographically strategic location. Sustained Bank support to the water sector began in the late 1970s with support for the construction of piped water systems in seven small towns, serving about 50,000 inhabitants, which was complemented with measures to strengthen the Water and Sewerage Branch. Establishment of the Lesotho Water and Sewerage Authority (WASA) as an independent entity in 1991 and its subsequent strengthening has resulted in a decrease in unaccounted-for water from 40% to 30% and a 67% increase in the customer base (from 35,000 in 2004 to 55,000 today). The utility’s revenues have consistently covered its operational costs and meet its debt service requirements. However, a significant investment program, supporting a rapid increase in household consumers within the lower tariff band has compounded debt obligations placing the utility under financial strain. This is likely to be compounded with the operation of the Metolong Dam and water supply infrastructure over the next few years.

Phase 1 of the Water Sector Improvement Project (WSIP1) was the first of a two-phase program to continue the reforms and address national priorities in parallel to support for the LHWP. Phase 1 closed in July 2011. The $14 million project has provided support to the office of the Commissioner of Water to lead water sector policy development, strategy setting, and coordination, and to support decision-making regarding a long-term solution to water supply for industrial growth and domestic use in the regularly water-stressed and rapidly growing Maseru area. The Water and Sewerage Authority has also supported capital investments, network extensions, a successful pilot peri-urban expansion program, and improvements in its systems and operational efficiencies, including support for a Performance Agreement between WASA and the Ministry of Finance.

Phase 2 of the Water Sector Improvement Project (WSIP2: $38 million) is supporting the Metolong Dam and Water Supply Program (MDWSP), which is a multi-donor partnership developed with the GoL over many years to realize an extensive infrastructure program in support of continued socio-economic growth. WSIP2 provides specific support to continued reforms in the sector, the water conveyance to the town of Teyateyaneng, and management of the environmental and social program for the MDWSP. The project is now supporting WASCo and the regulator to consolidated the financial position and improve the consumer confidence through improved service standards. Additional Financing ($15m) signed in July is pending effectiveness and will enhance capacity within WASCo, while supporting longer-term strategic planning through the necessary studies for water supply infrastructure investments. This includes a grant element to the Lesotho Highlands Development Authority (LHDA) to provide a predictable, transparent regime for advancing the hydropower component of Phase 2 of the LHWP.

The WBG is also supporting an assessment of the potential transfer of water from the highlands of Lesotho to Botswana. This is being financed through the multi-donor trust fund for Cooperation in International Waters in Africa (CIWA) within the context of the Memorandum of Understanding signed by Botswana, Lesotho and South Africa in March 2013 under the auspices of the Orange Senqu River Commission (ORASECOM). Additional support through the GFDRR to a multi-sector assessment of climate change in Lesotho and through an Africa wide study of infrastructure related climate change risks in seven river basins across Africa is also helping to understand the potential impacts on the long term sustainable yields in the Lesotho Highlands, changes in water demand downstream, and the financial and macro-economic implications for Lesotho.

Transport Sector

Lesotho’s past transport infrastructure development program largely concentrated its activities in the Lowlands strip that borders the Republic of South Africa, leading to a neglect of the basic access needs of populations that reside in the Mountains and other remote regions. This social exclusion has been identified as the underlying dynamic in the structure of inequality in the country today. Government therefore changed its approach over the last number of years, providing more and higher quality access to the mountainous regions. The Integrated Transport Project (ITP), funded by the WBG, the European Union (EU) and the Government of Lesotho, supports this initiative and aims at improving transport network connectivity so that populations located in isolated rural areas would have more reliable access to basic services. This project has contributed to an increase in the length (shares) of roads in “good” and “fair” condition as a share of total classified roads. The percentage of roads classified as “good” has risen from 27% to 38%. This is set to increase further with the rehabilitation of the Nyenye-Mapoteng-Makhoroana Road, currently under construction and being the last activity to be completed under the Project. The local population in Senqu-Senqunyane rivers area, estimated to be about 9,400 people of which about 51% are female, benefited from the World Bank Group-financed Senqu-Senqunyane civil works project. Average travel cost along this corridor reduced from original 1,500 Maloti per trip to 49 Maloti in 2014, data provided in the 2014 Social Impact survey. Share of rural population with access to an all-season road (within Senqu-Senqunyane project area) has reached the target of 42%.

In addition to improving access to basic services, the WBG assistance to the transport sector is also helping link people in rural areas to markets, creating the legal and regulatory framework for effective roads management, strengthening the institutional capacity of relevant agencies in the sector, and creating employment for inhabitants of rural and urban areas. This has resulted in the establishment of a fully functioning Directorate for Roads to manage the road network and a Roads Fund that aims to provide sustainable financing for routine and periodic maintenance of the road networks.

Health Sector
In 2010, the WBG and the Lesotho’s Ministry of Health and Social Welfare concluded the Health Sector Reform Program, which achieved a sustainable increase in the access to quality preventive, curative, and rehabilitative health care services. The project targeted the huge imbalance between overcrowded government health centers and non-government health centers, the high cost of medical care, long distances to medical facilities in mountain areas, and insufficient numbers of health personnel, especially in rural areas. Specific results from the project include:

  • an increase in the tuberculosis cure rate from 52% to 72%
  • a decrease from 4.5 to three hours in average waiting time at the country’s largest hospital
  • an increase from nine to 136 in the number of facilities providing mother-to-child HIV transmission prevention
  • expanded coverage of the DPT3 vaccine;
  • an increase in the number of mothers who received ante-natal care from a health professional
  • an increase in the percentage of births delivered in a health facility

More recently, the Global Partnership on Output-based Aid (GPOBA) grant of $6.25 million financed both the provision of outpatient services at the three newly refurbished filter clinics in Maseru as well as selected additional inpatient services at the main hospital. The OBA subsidies were disbursed based on the achievement of performance targets for key service delivery indicators. The refurbishment of the three filter clinics in Qoaling, Likotsi and Mabote was completed on schedule in April and May 2010 and the Queen ’Mamohato Memorial Hospital opened in October 2011. Health outcomes from the project have been significant: the pediatric pneumonia death rate at the new facilities dropped 65% in just five years compared to the old facilities; maternal deaths fell by 10%; overall death rate at the facilities reduced by 41%. The new health network not only includes new and improved primary care facilities, but additional services not available before, like a neonatal intensive care unit. As a result, 70% of extremely low birth weight babies now survive, virtually all of whom would have died before.

The HIV and AIDS Technical Assistance Project ($5 million) is recognized as an important contribution to the national AIDS response. The project’s objective is to build capacity of government’s agencies and civil society organizations at both national and local levels to address the identified key gaps in implementing the National HIV and AIDS Strategic Plan in an effort to contain and reverse the epidemic. Focusing on high-priority capacity gaps such as building non-government organizations’ (NGOs) capacity to access and manage grants, strengthening the supply chain to improve HIV commodity availability, and supporting district and community councils to mainstream prevention activities – the project is implemented by the Lesotho Council of NGOs (LCN), Ministry of Health (MOH), and Ministry of Local Government and Chieftainship (MOLGC). To date, contributions have been made in the development of training materials for Auxiliary Social Workers and provision of training on Orphans and Other Vulnerable Children (OVC) identification and referral, development of an OVC adoption policy and guidelines, update of national public health laws with a view to ensuring access to quality services, empowering the regulatory and control mechanisms and protecting the public and support to implementation of the Essential Service Package (ESP) of HIV prevention interventions at community level.

The Maternal Newborn Health (MNH) Performance Based Financing (PBF)

The Board of the WBG approved a $16 million Maternal Newborn Health (MNH) Performance-based Financing (PBF) Project in April 2013. The project became effective in February 2014 and is currently being implemented by the PBF unit under the Ministry of Health. The project’s goal is to improve the utilization and quality of maternal and newborn health services in selected districts in Lesotho. Through PBF, the project will promote a continuum of care during pregnancy, childbirth, postpartum and the neonatal period in order to combat Lesotho’s serious worsening of maternal and child mortality. The project will contribute to improving the quality and uptake of MNH services by stimulating performance of health workers at health centers as well as Village Health Workers, and improving the capacity to provide MNH care through facility-level support, including training of health professionals and monitoring and evaluation. The project activities will be piloted in Quthing and Leribe districts during the first year of implementation. The project will be gradually scaled-up to all districts excluding Maseru district. Government has continued to demonstrate ownership and commitment to the project by staffing the PBF unit and providing counterpart funding to support the unit.

Agriculture

The Smallholder Agriculture Development Project (SADP) is funded jointly by the WBG and the International Fund for Agricultural Development (IFAD) with total investment of about $25 million. The objective of the SADP is to increase, over a six-year period, marketed output among project beneficiaries in Lesotho’s smallholder agriculture sector. The two main project outcomes are an increase in agricultural market opportunities in the project area, and productivity and output of smallholder farming activities in the project area increased. The project operates in four of Lesotho’s 10 districts (Botha-Bothe, Leribe, Berea, and Mafeteng). The project became effective in March 13, 2012 and has been on the right track since its implementation. The project Mid-Term Review (MTR) took place in mid-May 2014 and concluded that the project in on the right track towards achieving its development objectives. The project management team is currently implementing key recommendations from the MTR geared towards improving the performance of the project by speeding up the pace of project implementation and securing its long-term sustainability.

Public Financial Management (PFM) Reform

The government and development partners have committed to move to a new phase of PFM reforms founded on greater implementation of the new rules and regulations, tighter internal controls and greater attention to the benefits of PFM reforms for Ministries, Departments, Agencies (MDAs) and sectors. In preparation for this new phase, the government and development partners have been working together since late 2011, through the Integrated Reform Steering Committee (IRSC), on creating a future reform program. An initial program was approved in principle by the IRSC in May 2012, and then further refined and finalized with technical assistance from the International Monetary Fund (IMF) during the last quarter of calendar 2012. A final version of the Government Public Financial Management Reform Action Plan (PFMRAP) 2012-2017/18, with a foreword by the Minister of Finance, was approved by the IRSC in March 2013. A high-level PFM Workshop was also hosted by the Minister of Finance on 11 November, 2013 with representation from Parliament (specifically the chairperson of the Public Accounts Committee); several Ministers (including Finance, Development Planning, Health, Education and Social Development); Development Partners (DPs, including the IMF, EU, AfdB and UNDP); several Principal Secretaries, Component Leaders for the PFM Reform Action Plan (PFMRAP), and other key staff involved in its implementation. The GoL provided an overview of the PFMRAP, and the associated implementation arrangements, and the workshop concluded with overwhelming support for its implementation and appreciation to the DPs for their support.

The approved PFMRAP covers a number of strategic actions, that have been structured into 8 components and linked to key results (with reference to the associated PEFA performance indicators where possible).

The WBG has signed a Project Financing Agreement with the Government of Lesotho on 24 February 2014.  The project became effective on 25 July 2014.

This operation will support the GoL with the implementation of key result (b) of component 5 above of its PFMRAP. Essentially this will entail stabilization and improving the effectiveness of the IFMIS platform.

The main beneficiaries of this project are: the core Integrated Financial Management Information System (IFMIS) team, PFM staff who depends on the IFMIS for the execution of their functions, Program Managers and Heads of Ministries, District Councils, the Auditor-General, Cabinet, the Public Accounts Committee, Parliament, the Central Bank, development partners and citizens and suppliers who transact with the Government.

Other components / activities of the PFMRAP will be supported by the EU, African Development Bank (AfDB) and IMF, under oversight and coordination from the IRSC. AFDB will be providing financial support approximating USD 4.2m primarily for activities related to procurement, internal audit and external audit. IMF will be providing technical assistance on cash management and PFMRAP coordination. The EU will be supporting the remainder of the components with financial support and technical assistance in total approximating EUR 10m.

The rationale for the PFM reform support project is consistent with, and aligned to Pillar 6 of National Strategic Development Plan (NSDP) 2012-2016.  The emphasis under this Pillar on PFM related interventions is primarily focused on efficient delivery of quality, timely services in an accountable and transparent manner; and political governance, including decentralization and local government transformation. This pillar also recognizes the fact that a sound PFM is crucial to achieve the national development goals of promotion of peace, democratic governance and building effective institutions.

Last Updated: Apr 16, 2015

Fifteen development partner agencies are active in Lesotho. Donor coordination, alignment and harmonization have improved since the formation of Development Partners Consultative Forum in 2005, which is co-chaired jointly by the United Nations Development Program (UNDP) and US Embassy. All development partners are members of the Development Partners Consultative Forum (DPCF), which includes the World Bank Group.

The overarching objective of the Development Partners Consultative Forum is to increase level and frequency of communication and promote transparency between the development partners and the government. The forum seeks to improve aid coordination, promote harmonization and support the government in ownership of development processes as envisaged in Paris Declaration (PD) and Accra Agenda of Action (AAA). Donor development strategies in Lesotho are generally aligned with the government’s priorities as set out in National Strategic Development Plan (NSDP).

The WBG has built successful partnerships with a range of donors, such as the joint- financed Integrated Transport Project with the European Commission, the Smallholder Agriculture Development Project with the International Fund for Agricultural Development, and the Metolong Dam and Water Supply Program with the U.S. Millennium Challenge Corporation, the European Investment Bank, the Arab Bank for Economic Development in Africa, the OPEC Fund for International Development, the Kuwait Fund, the Saudi Fund, and the Republic of South Africa. The Bank mobilized Fast-Track Initiative (FTI) grant resources and partnered with Irish Aid to create the first pooled fund in the education sector. The Bank manages the implementation of grants from FTI and Irish Aid jointly.

 

Last Updated: Apr 16, 2015


LENDING

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

*Amounts include IBRD and IDA commitments