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Lesotho is a small, mountainous, 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 $999.7 in 2022. Lesotho is classified as a lower middle-income country. It is primarily 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.

The current government came into power in November 2022 and is led by the Right Honourable Prime Minister, Samuel Ntsokoane Matekane’s Revolution for Prosperity (RFP) party in coalition with the Movement for Economic Change (MEC) and Alliance for Democrats (AD) parties.

The government has extended Lesotho’s Second National Strategic Development Plan (NSPD II) 2018/19–22/23 for another five years until 2027/28. The NSPD II’s four priorities are: enhancing inclusive and sustainable economic growth and private sector-led job creation; strengthening human capital; building enabling infrastructure; and strengthening national governance and accountability systems.

Economic growth

Lesotho’s economy grew by 1.8% in 2022. The main growth drivers were construction, mining, manufacturing, business services, and public administration. Agriculture also contributed positively due to good seasonal rainfalls and input subsidies.

The inflation rate was 8.3% in 2022 compared with 6% in 2021. Inflation reached a peak at 9.8% in July 2022, and it has since receded to 4.5% in July 2023 due to moderation in the prices of fuel and food. The current account deficit widened from 1.4% of GDP in 2021 to 2.4% in 2022, primarily due to higher imports of capital goods and services associated with the ongoing construction project of the Lesotho Highlands Water Project and limited export growth.

The fiscal situation deteriorated, with an overall deficit of 7.6% of GDP in 2022 compared to 4.2% in 2021. The increase in expenditures was driven by a rise in both recurrent expenses and capital spending, while revenue declined due to lower South Africa Customs Union (SACU) receipts. The public debt stock was 59% of GDP in 2022 mainly due to the redemption of 7-year and 10-year Treasury Bonds. A majority of public debt is contracted from external sources, accounting for 72.7% of the total debt. Regarding shares to GDP, external and domestic debt stood at 44.8% and 16.9% of GDP in 2022, respectively. Lesotho’s risk of external and overall debt distress remains moderate but risks to debt sustainability have risen since the previous Debt Sustainability Analysis of 2021.

The IMF’s staff visit to Lesotho occurred in December 2022, and the Article IV consultation mission occurred in May 2023. The IMF continues to maintain close relations with the authorities through policy dialogue, technical assistance, and capacity building, including an engagement in improving governance and transparency, enhancing public financial management, improving tax policy, strengthening national account and government finance statistics, implementing risk-based supervision, and improving liquidity management of the central bank.

Unemployment remains high, estimated at 18% in 2022, 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 2022 suggest that 32.4% of the population is still trapped under the $2.15 poverty line. Addressing the fiscal and external challenges remains difficult in an environment of high inequality and weak institutions.

As part of the budget bill for 2023/2024, the government outlined measures to reduce recurrent expenditures and scale up domestic revenue. However, stronger fiscal consolidation efforts would entail rationalizing the wage bill. Such consolidation, 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.)

Development Challenges

Lesotho’s greatest challenges include a high unemployment rate. The main factors inhibiting returns to labor and jobs in Lesotho are lack of skills, high burden of disease (especially HIV/AIDS and tuberculosis (TB)), poor investment climate, and lack of key infrastructure. The HIV prevalence rate in Lesotho is 25% in the adult population (15-49 years), the second highest globally. The incidence of TB stands at 724 cases per 100,000, according to the 2017 Global TB Report, the second highest. 

Last Updated: Sep 20, 2023

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

*Amounts include IBRD and IDA commitments
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Additional Resources

Country Office Contacts

Main Office Contact
Letšeng Diamonds House,
Second Floor,
Corner Kingsway and Old School Road
Maseru 100, Lesotho
+ 266-222-17000
For media inquiries
Lavinia Thoriso Engelbrecht
Sr. External Affairs Officer
For project-related issues and complaints