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» 23.04.2010 - Lesotho adopts new system to cut on road accidents
» 12.02.2010 - Lesotho to focus budget on alternative revenue creation
» 05.10.2009 - Lesotho signs $25 million agreement with WB
» 23.09.2009 - Lesotho will be hard-hit by declining SACU revenues
» 07.08.2009 - Lesotho govt to also investigate industrial pollution
» 30.07.2009 - Forum discusses role of infrastructure to health care
» 04.06.2009 - Southern Africa gets EPA deal with Europe
» 08.04.2009 - Lesotho ready to roll out social cash grants

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Politics | Economy - Development

Modest economic growth in Lesotho

afrol News, 13 October - Following a difficult year of stagnation, Lesotho is set to experience an estimated economic growth of 2.5 percent in the 2006-07 fiscal year. This is translated to real growth per capita, as the Kingdom's population currently is detracting due to the AIDS pandemic.

According to the latest International Monetary Fund (IMF) report on Lesotho, GDP growth in the 2005-06 fiscal year was only estimated at 1.3 percent. The current fiscal year is projected to become somewhat better in the impoverished Kingdom, with an expected growth rate at 2.5 percent.

In most African countries, such a low GDP growth rate would actually mean more poverty, as the population is growing at an even faster rate (typically between 2.0 and 3.5 percent). In Lesotho, however these numbers are translated into real per capita growth, as the population currently is shrinking at an annual rate of 0.45 percent due to the high HIV/AIDS prevalence rate that is has caused a very high mortality rate.

The IMF report describes a year of progress in Lesotho, despite external shocks and great difficulties. The Maseru government had "made good progress toward macroeconomic stability in recent years," the report said, referring to Lesotho's compliance to IMF-prescribed economic reforms.

Externally inflicted problems had been grave during the last few years. Agricultural production was hit by drought in 2002-05 and excessive rainfall in early 2006, which also damaged roads and bridges in the rural areas where about 70 percent of the population lives.

The manufacturing sector was adversely affected by a substantial appreciation of the national currency, the loti, in 2002-2004 and the removal of textile quotas by industrial countries in early 2005, which led to the loss of about a quarter of jobs in the garment sector.

Despite these shocks, the Maseru government had been able to make some economic gains. Its fiscal balance has been in surplus since 2003/04, "owing mainly to rapidly rising receipts from the South African Customs Union (SACU) and improved domestic revenue collection," the IMF report found.

Also, Maseru had been able to achieve bilateral agreements restraining exports from China to the US market, causing its garments sector to see a modest recovery. Some re-employment has taken place the last year.

While the Kingdom experiences some growth and macroeconomic gains, the external shocks hitting agriculture and the garments sector - combined with the ongoing HIV/AIDS crisis - have only lead to growing poverty in Lesotho. More than half of Basothos are now believed to live below the poverty line.

The IMF report highlights plans by the Maseru government to reduce poverty in its 2006-07 budget, which included "a significant increase in expenditures on infrastructure." Further, "the wage bill and other recurrent outlays" were also projected to increase relative to GDP. However, Lesotho would also have to increase its budget expenditures on debt repayments this year.

"Lesotho's medium-term outlook is clouded by considerable downside risks, including a further loss of trade preferences for the export sector and a decline in SACU receipts relative to GDP," the IMF finally cautioned, seeing little hope for the Kingdom to tackle its problem of widespread poverty during the next years.

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