Lesotho could see job growth and economic expansion through private sector-led growth and public sector reforms, according to the World Bank's first Lesotho Economic Update (LEU) released on April 7, 2025. The report evaluates the country's recent economic performance and future prospects.
In 2024, Lesotho experienced increased transfers from the Southern Africa Customs Union (SACU) and water royalties, resulting in fiscal surpluses. These surpluses facilitated a boost in public investment, particularly the second phase of the Lesotho Highlands Water Project (LHWP-II), which is expected to temporarily increase economic activity.
World Bank Division Director for Lesotho, Satu Kahkonen, commented on the potential for inclusive development: “Lesotho can leverage renewed economic activity for inclusive development, fostering job creation and better quality of life for the people. Effective management of revenues is critical for sustainable long-term growth and poverty alleviation.”
The Economic Update suggests using the increased SACU revenues and water royalties to fortify fiscal buffers and foreign reserves. It proposes the creation of a stabilization fund to manage debt accumulation and guide fiscal policy.
The report advises comprehensive public sector reforms to improve the efficiency and effectiveness of public spending, directing more resources to public investment while managing recurrent spending. Enhancements in public investment management and procurement have the potential to align public spending with development needs.
For private-sector-led growth, the LEU suggests ambitious reforms focusing on export-oriented investment, policy alignment with regional agreements like the African Continental Free Trade Area, and easing regulatory burdens on businesses. The report also advocates for improving education outcomes and reducing urban-rural disparities to support sustained growth.
Honourable Dr. Retšelisitsoe Adelaide Matlanyane, Minister of Finance and Development Planning, emphasized the alignment of the report with government policies: “The inaugural Lesotho Economic Update is well aligned to our policy areas as evidenced by our 2025/2026 budget which is anchored on fiscal prudence and seeks to create opportunities for a more active role for the private sector by fostering a business environment that attracts both domestic and foreign investment. This analysis comes at a pivotal time and will contribute to us reshaping our economic agenda so that every Mosotho has an opportunity to thrive.”
The LEU aims to stimulate discussions on macro-economic issues in Lesotho, offering a chance to transform fiscal policy and promote growth.