Lesotho is a small landlocked country, completely surrounded by the Republic of South Africa, 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 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.
The February 2015 election brought in a seven party coalition government, which controls 65 of 120 parliamentary seats.
Growth is expected to slow from an estimated 2.7% in 2015 to 2.4% in 2016 due to weak growth prospects in South Africa, lower SACU revenues, and the planned fiscal consolidation. 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.
Lesotho’s fiscal situation is precarious. Repeated fiscal deficits in recent years have progressively elevated the public debt to gross domestic product (GDP) ratio to 60% in 2015/16, and the projected sharp decline in SACU revenues from 2016/17 (-8.4% of GDP) call for a substantial and sustained fiscal adjustment to protect debt sustainability and the peg with the South African Rand. With fiscal consolidation, GDP growth is projected to remain in 2016 at levels comparable to 2015, before starting to accelerate from 2017. Meanwhile, 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.
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 FY2015-16, 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 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: Apr 11, 2016