Lesotho is a small, mountainous, and land-locked country, surrounded by its much larger neighbor, South Africa. It has a population of about two million, and a per capita gross domestic product (GDP) of $1,141. Lesotho is classified as a lower-middle-income country. It is mostly highlands, with its lowest point 1,400m above sea level. Previously a British protectorate, the nation gained its independence in October 1966. Lesotho is a constitutional monarchy, ruled by a King as head of state, and governed by a 33-member Senate and a 120-member National Assembly. Lesotho held elections in June 2017 for the third time in five years. This led to the formation of a four-party, coalition government, led by Prime Minister Thomas Thabane. In keeping with recommendations for key governance and security reforms, made both by the Commonwealth and the Southern African Development Community (SADC), Lesotho’s leadership has committed itself to
Over the past three years, Lesotho’s economy has faced headwinds from political instability, and a protracted period of slower growth in South Africa, which has led to falling SACU revenue and liquidity challenges. Economic growth for the last three years averaged approximately 1.3%. A contraction was experienced in 2017/18 fiscal year on the back of a contraction in agriculture output and fiscal challenges. Growth is projected to recover modestly in the next three years boosted by an increase in construction associated with the second phase of the Lesotho Highland Water Project and diamond mining. Unemployment remains high at 24 to 28%, coupled with high inequality and poverty. Lesotho made progress in poverty reduction in the 2000s by lowering its headcount poverty rate ($1.9/day PPP) from 61.3% in 2002 to 59.7% in 2011. Estimates for 2017 suggest that 51.8% of the population is still trapped under the US$1.90 poverty line.
The country finds itself at a crossroads needing new engines for growth, a more streamlined role for the state, and a dynamic private sector to help it seize opportunities in regional and global markets. Lesotho has made important progress in improving its Doing Business indicators, especially in terms of streamlining business and property registration processes that hinder the growth of local businesses, as well as in incoming Foreign Direct Investment (FDI). However, more progress is needed to improve the business environment and achieve the country’s development goals. The decline in South African Customs Union (SACU) revenues
As part of the budget bill for 2018/19, the government outlined some measures to reduce the wage bill and maintain macroeconomic stability and fiscal sustainability. These measures include; continuing its efforts to remove ghost workers, freezing new positions and limiting hiring to critical positions only, linking notch increases to performance, and introducing voluntary retirement. The government is in discussions with the International Monetary Fund (IMF) to support these reforms, and a disbursement into reserves (which have fallen with lower SACU revenue) is expected if the program discussions are fruitful. An IMF program would open
Lesotho’s greatest health challenge remains its high HIV/AIDS prevalence and TB co-epidemic. The HIV prevalence rate in Lesotho is 25% in the adult population (15-49 years), the second-highest in the world. The incidence of TB stands at 724 cases per 100,000, according to the 2017 Global TB report, the second-highest globally. While high health costs contribute to the narrowing of the fiscal space, high HIV/AIDS and TB rates contribute to persistently high inequality and poverty.
Last Updated: Nov 12, 2018