Lesotho, a small completely surrounded by the Republic of South Africa, it has a population of about two million. At 30,000 sq, km, 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 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 among key coalition partners led the suspension of parliament by the Prime Minister, raising concerns about the ability of government to manage the legislative agenda to support its economic programs. The Southern African Development Community led peace mediation efforts, which resulted in general elections in February 2015 and brought in a seven-party coalition government, which controls 65 of 120 parliamentary seats.
Growth is expected to remain low as in 2015 with an estimated 2.7% in 2015 to 2.6% in 2016 due to weak growth prospects in South Africa, lower Southern Africa Customs Union (SACU) revenues and lower global growth prospects.
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. 2010/11 Household Budget Survey estimates show that the national poverty head count rate stood at 57.1% and the Gini Coefficient based on consumption is estimated to be at about 0.54. Poverty has decreased in urban areas, while it has increased in rural areas.
Lesotho’s is facing a tough fiscal outlook due to the decline in SACU revenues from 29.2% of gross domestic product (GDP) in 2014/15 to 16.4% of GDP in 2016/17 and is expected to remain low in the medium term. Recent depreciation of the loti have increased the public debt to GDP ratio to 60% in 2015/16, and the projected sharp decline in SACU revenues call 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 projected to widen in 2016/17 with lower SACU revenues, before progressively narrowing thereafter as net exports would grow. Although fiscal consolidation can have a small negative impact on GDP in the short term it is necessary for macroeconomic stability and higher growth in the medium-to-long term.
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 59% in 2015/16, mostly due to the increase in the wage bill which is 22% of GDP in 2015/16, one of the highest ratios in the world. The level of public spending is unsustainable, and it can no longer be relied upon to drive growth.
The government regards HIV/AIDS as one of its most important development issues, which it is addressing the pandemic through its HIV/AIDS National Strategic Plan (NSP). Lesotho has the second highest HIV prevalence among adults in the world, at 23.4% in 2014 and is projected to remain stable for the next few years. Between 1990 and 2005, life expectancy at birth declined from almost 60 years to 47 years, and currently stands at 49 years. Between 2014-15 the number of new HIV infections were estimated at 19,000.
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: May 12, 2016