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International Monetary Fund. African Dept.

sufficient time to complete the sixth and final review. The Board’s decision will enable an immediate disbursement of an amount equivalent to SDR 5.68 million (US$8.6 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 44.925 million (US$67.9 million). In the fiscal year 2012/13 (April to March), the Lesotho economy grew by 3½ percent, with growth negatively affected by a drought. The drought severely affected agricultural production, but the authorities’ adjustment efforts and financial aid by Lesotho’s international partners

International Monetary Fund. African Dept.
Lesotho has been simultaneously hit by the pandemic, declining transfers from the Southern African Customs Union (SACU), and the impact of the war in Ukraine. The pandemic exacerbated the impact of sluggish regional performance, climate shocks, and longstanding structural issues such as regulation, governance, political stability, financial inclusion, and diversification. Public expenditure has continued to increase, such that the decline in external transfers precipitated significant financing pressures and growing domestic arrears. With limited inflows to the private sector, the resulting public sector-driven external imbalances have continued to put pressure on international reserves needed to maintain the exchange rate peg.
International Monetary Fund. African Dept.

Recent Developments, Outlook and Risks A. Economic Developments in 2010/11–2013/14 1. The Lesotho economy performed well in recent years, despite being hit by a severe balance of payments and fiscal shock and periods of adverse weather conditions for agriculture . Since fiscal year 2010/11 (April-March), real GDP growth averaged just over 5 percent a year—driven by large scale investments in the mining and water sectors—while annual inflation fluctuated between 3½ and 6 percent ( Tables 1 - 6 and Figures 1 – 3 ). An ample stock of official

International Monetary Fund. African Dept.
The Extended Credit Facility (ECF) program extended to Lesotho after a sharp fall in revenues remained broadly on track. Lesotho maintained positive growth supported by expansion of mining and construction. Fiscal consolidation efforts have helped to strengthen international reserves, despite weak diamond prices. Executive Directors welcomed the government’s continued efforts to improve the business climate and promote private sector development. They also suggested the need to maintain fiscal consolidation efforts, while safeguarding priority social and growth-promoting capital spending.
International Monetary Fund. African Dept.

Lesotho (CBL) and the rebuilding of official international reserves (to 6.3 months of imports of goods and services as of end-2014/15). Government’s capital spending, however, has fallen in recent years, mainly because of a drop-off in grants from development partners (by several percentage points of GDP) and, most recently, an under execution of the capital budget. 3 Lesotho: SACU Revenues [Percent of GDP] Compensation of Employees [percent of GDP] 3. Spillovers from slower growth in neighboring South Africa have begun to weigh on the Lesotho

International Monetary Fund. African Dept.

focused towards development of these sectors. In addition, the Lesotho National Development Corporation (LNDC) will be restructured to better serve its mission of private sector development. Recent Economic Developments and Outlook 4. Following weak growth in 2017, the Lesotho economy recovered modestly to 1.9 percent in 2018, owing to improved performance in mining, manufacturing, and financial services. Agricultural output remained subdued due to prolonged dry spells, given the country’s dependence on rain-fed agriculture. In the medium term, growth is expected

International Monetary Fund. African Dept.
International Monetary Fund. African Dept.

The Extended Credit Facility (ECF) program extended to Lesotho after a sharp fall in revenues remained broadly on track. Lesotho maintained positive growth supported by expansion of mining and construction. Fiscal consolidation efforts have helped to strengthen international reserves, despite weak diamond prices. Executive Directors welcomed the government’s continued efforts to improve the business climate and promote private sector development. They also suggested the need to maintain fiscal consolidation efforts, while safeguarding priority social and growth-promoting capital spending.

International Monetary Fund
Lesotho's economy has continued to perform well under the Poverty Reduction and Growth Facility (PRGF) arrangement despite adverse weather conditions and the regional food shortage. Executive Directors welcomed the strategy to achieve higher and sustainable economic growth, reduce poverty, and improve social conditions by creating private sector developments and labor-intensive industries. They appreciated the monetary and fiscal policies, the integration of PRGF objectives with the budget, and the improvement in the tax system. They emphasized the need to accelerate structural reforms and supported the Anti-Corruption Unit.
International Monetary Fund
The Lesotho economy is experiencing a downturn of economic growth, high unemployment and poverty, and fiscal and balance-of-payments pressures. The size of the proposed fiscal adjustment is adequate because it focuses on improvement in the external current account balance and the maintenance of gross international reserves. The current monetary arrangement with South Africa has served Lesotho well. The efforts of the central bank to reduce the wide interest rate spreads, encourage financial intermediation, mobilize domestic savings, and reduce capital flight have been commended.