Overview

  • Lesotho is a small, mountainous, and landlocked 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 $1,222.

    Lesotho is classified as a lower-middle-income country. It is mostly highlands, with its lowest point 1,400 meters 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 a period of five years. This led to the formation of a four-party, coalition government, led by Prime Minister Thomas Thabane.

    In keeping with recommendations made by the Southern African Development Community (SADC), the government is currently undertaking key Constitutional, Security, Parliamentary, Judicial, Public Sector, Economic and Media Sector Reforms.  

    Economic growth

    Over the past four years, Lesotho’s economy has been negatively affected by political instability and a prolonged period of slow growth in South Africa, which has led to falling Southern Africa Customs Union (SACU) revenue and liquidity challenges. Between 2015 to 2018 economic growth averaged 1.4%. Real gross domestic product (GDP) is projected to grow by 2.6% in 2019 and is projected to average 1.5% in the next two years.

    Economic growth will be  boosted by an increase in construction associated with the second phase of the Lesotho Highlands Water Project, a second compact from the Millennium Challenge Corporation and diamond mining. The fiscal deficit is projected to narrow in FY2019/20 due to increased tax collection and the reduction of expenditure. Unemployment remains high at 24 to 28%, coupled with high inequality and poverty. The economic growth Lesotho experienced since the early 2000s has resulted in poverty reduction. Between 2002 and 2017, the national poverty rate declined only modestly, from 56.6% to 49.7%. Over the same period, food poverty declined from 34.1 to 24.1% while the poverty gap declined from 29% to 21.9%. This occurred because consumption growth between 2002 and 2017 was inclusive for the poorest segments of the population, leading to a reduction in the Gini coefficient of nearly seven points. Although Lesotho is now more equal than its neighbors, with a Gini coefficient of 44.6, it remains one of the 20 % most unequal countries in the world.

    Development Challenges

    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 foreign direct investment (FDI). However, more progress is needed to improve the business environment and achieve the country’s development goals. The decline in Southern African Customs Union (SACU) revenues continues to pose a challenge to the country's fiscal outlook: SACU revenues fell from 30% of GDP in FY2012/13 to an estimated 17.7% of GDP in FY2017/18 and are projected to decline further to 15.2% of GDP in FY2019/20.

    The FY2019/20 budget proposes fiscal consolidation. However, the measures are unlikely to fully address the current fiscal challenges. Proposals are made to cut recurrent expenditure and increase domestic revenue. Stronger fiscal consolidation efforts would entail rationalizing the wage bill. Such consolidation, in addition to structural reforms, financial reforms, and the reconciliation of fiscal and financing data could open the way for broader support from development partners. The support would help the government to cushion reserves, which have severely fallen with lower SACU revenue.

    Lesotho’s greatest health challenge remains its high HIV/AIDS prevalence and tuberculosis (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: Sep 26, 2019

  • Development Strategy: Lesotho’s vision

    The Lesotho government’s development goals are reflected in its Vision 2020 and in the second National Strategic Development Plan (NSDP-II) 2018/19 – 2022/23.

    World Bank Group Strategy

    The World Bank Group (WBG) completed a Systematic Country Diagnostic (SCD) in 2015, which underpins the Country Partnership Framework for 2016-2020.

    World Bank Group Portfolio

    The portfolio composition of Lesotho is made up of a total of 10 projects, with a total commitment of $306.90 million, of which about $85.28 million is disbursed.

    Projects include the Second Private Sector Competitiveness and Economic Diversification Project, the Lesotho Education Quality for Equality Project, the Southern Africa Tuberculosis and Health Systems Support Project , the Smallholder Agriculture Development Project , the Smallholder Agriculture Development Project-II, the Public Sector Modernization Project, the Social Assistance Project, the Agriculture Productivity Program for Southern Africa, the Lowlands Water Development Project -II  and the Lesotho Transport Infrastructure and Connectivity Project.

    Last Updated: Sep 26, 2019

  • Health Sector

    The Health Sector Performance Enhancement Project (HSPEP) has closed and is transitioning towards a Nutrition and Health System Strengthening Project which is planned to be effective beginning of 2020. Building on the success of the quality improvement program piloted under the HSPEP, the new project will implement a quality reward system and a multisectoral package of nutrition specific and sensitive interventions.

    Lesotho’s overall progress since the Southern Africa Tuberculosis Health System Strengthening Project was launched in December 2016 is satisfactory. Overall performance include notable achievements: (i) a four-fold increase in the number of bacteriologically confirmed TB cases over the past three years, which is a marker of quality improvement; (ii) the National TB Reference Laboratory (NTRL) successfully upgraded to bio-safety level three standards and human resource capacity for the laboratory management strengthened; related to this, the NTRL and Mafeteng and Motebang labs have progressed towards accreditation to three stars and above; (iii) intensified roll-out of community-level TB case finding, which led to a 63% increase in the number of presumptive clients analyzed by Gene Xpert and an increase of 214% of TB cases detected between project baseline and the midterm review.

    Social Protection

     

    The Social Assistance Project aims to support the Government of Lesotho in improving the efficiency, equity and shock-responsive function of selected social assistance programs and, in the event of an Eligible Crisis or Emergency, to provide immediate and effective response to said Eligible Crisis or Emergency. Through the project and in partnership with UNICEF and the European Union, the Government of Lesotho has been able to (i) successfully merge the Post Primary Bursary Program (PPB) and the Orphans and Vulnerable Children Program into one program under the administration of the Ministry of Social Development, hence saving important administrative costs; (ii) expand coverage of the Child Grant Program (CGP) from 27,000 households to approximately 42,000 households, (iii) increase coverage of the National Information System for Social Assistance (NISSA) to all Community Councils in the country: (iv) deactivate more than 12,000 names of deceased beneficiaries from the Old Age Pension (OAP) database, saving the equivalent of $7 million; (v) support the automation of data cross-match between the Civil Service Pension and the OAP to identify and remove double dippers; (vi) pilot a proof of life process whereby approximately 5,000 OAP pensioners and their proxies without national identification were provided with one; (vii) support the creation of the Department of Social Assistance, within which all managerial positions have been filled.

    The project has also financed emergency top-ups to CGP recipients in the amount of $1.9 million. A total of 27,000 beneficiaries received CGP top-up payments for two consecutive quarters, to help them mitigate the negative effects of the 2015/16 El Nino drought.

    Last Updated: Sep 26, 2019

  • Partners in Lesotho include members of the diplomatic corps, consular missions, and international organizations. Presently, there are five Embassies/High Commissions and nine international organizations, of which seven are from the UN family, and the other two are the Delegation of the European Union and the World Bank. Development Cooperation is coordinated by the Ministry of Development Planning.

    Last Updated: Sep 26, 2019

Api


LENDING

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

*Amounts include IBRD and IDA commitments


PHOTO GALLERY

More Photos Arrow

In Depth

Empowering Women = Growth

The latest Africa’s Pulse says initiatives to empower poor people, women and girls are essential to progress.

CPIA Africa

Africa’s poorest countries saw little to no progress on average in improving the quality of their policy and institutional frameworks in 2018.

IDA in Africa

With IDA’s help, hundreds of millions of people have escaped poverty—through the creation of jobs, access to clean water, schools, roads, nutrition, electricity, and more.

World Bank Africa Multimedia

Watch, listen and click through the latest videos, podcasts and slideshows highlighting the World Bank’s work in Sub-Saharan Africa.

Doing Business in Lesotho

The Doing Business report provides objective measures of business regulations and their enforcement. See where your country ranks.

Additional Resources

Country Office Contacts

Main Office Contact
Letšeng Diamonds House,
Second Floor,
Corner Kingsway and Old School Road
Maseru 100, Lesotho
+266-2221-7000
For general information and inquiries
Elita Banda
Communications Associate
+266-2221-7000
ebanda@worldbank.org
For project-related issues and complaints
lesothoalert@worldbank.org