Lesotho is a small landlocked country, completely surrounded by the Republic of South Africa. W It has a population of about two million. At 30,00sqkm Lesotho’s highlands constitute two-thirds of 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. In mid-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, which resulted in general elections in February 2015.

The results of the February 2015 election brought in a seven party coalition government, which controls 65 seats out of 120 parliamentary seats.

Economic growth

Gross domestic product (GDP) growth is projected at 2.6%, driven primarily by mining production, construction and government services.

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.

The fiscal situation continues to deteriorate. Driven by public spending increases, the non-SACU) fiscal deficit increased from 25.2% of GDP in FY2012/13 to 29.9% of GDP in FY2013/14. In FY2014/15, the non-SACU fiscal deficit is projected to decline to 27% 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 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.

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

Last Updated: Oct 07, 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.

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 July31, 2015, the portfolio was comprised eight projects supported by the International Development Association (IDA), with total commitment amount of $157.6 million.

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.

International Financing Cooperation (IFC) is acting as lead transaction advisor on four Public Private Partnership in Infrastructure (PPP) projects for Lesotho. The Multilateral Investment Guarantee Agency (MIGA) is not active in Lesotho.

Last Updated: Oct 07, 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.


For the past four years, the World Bank Group (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.   This project closed in April 2015 having reached a satisfactory rating after overcoming difficulties in the beginning. The Implementation Completion Report (ICR) is being completed and lessons are being incorporated into the new project design.

The project development objective of the new project is to improve quality of primary and secondary education service delivery in targeted areas.

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 which was officially launched with signing of the Agreement on 2011 August 11, 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.

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.

WBG assistance to the transport sector is 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. As part of this effort, a fully functioning Directorate for Roads was established to manage the road network and a Roads Fund was set up to provide sustainable stream of financing for routine and periodic maintenance of the road networks. 

Health Sector

The HIV and AIDS Technical Assistance Project (US$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.

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’s goal is to improve the utilization and quality of maternal and newborn health services in selected districts in Lesotho.


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).

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.

The approved Public Finance Management Reform Support Project (PFMRAP) covers a number of strategic actions, that have been structured into eight 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 government with the implementation of key result (b) of component five above of its PFMRAP. Essentially this will entail stabilization and improving the effectiveness of the IFMIS platform.

Last Updated: Oct 07, 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 until 2015. Effective 2015 the DPCF will be coordinated by Ministry of Development Planning. All development partners are members of the Development Partners Consultative Forum (DPCF), which includes the World Bank Group.

Last Updated: Oct 07, 2015


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

*Amounts include IBRD and IDA commitments