- Lesotho, as many Southern African neighbours, is still hard hit by the global economic crisis. Substantially no growth was registered last year, and this year will see no improvement.
"The global economic crisis has had an adverse impact on Lesotho. Demand for exports has fallen, economic growth has declined, and the projected sharp reduction in Southern African Customs Union (SACU) revenues is likely to result in a significant deterioration in both the fiscal and external deficits."
This is the strikingly negative conclusion in the latest analysis of Lesotho's economy by the International Monetary Fund.
The analysis is backed by statistics painting a picture of stagnation in Lesotho. Last year saw a GDP growth of only 0.9 percent. Growth for 2010, which the Fund until recently had projected to reach 3.0 percent, is now downscaled to a pessimistic 0.6 percent.
Taking Lesotho's population growth into account, this means a negative per capita growth for two years in a row and a deepening of poverty in the kingdom.
The negative trend in 2009 and 2010 comes after several years of economic stability and acceptable GDP growth rates. This deteriorated performance had come as a result of reduced diamonds and textiles export demand, according to figures presented by the Lesotho government.
But the global crisis has also resulted in a significant decline in revenues from the Southern African Customs Union (SACU), which account for around 60 percent of Lesotho's tax revenue. SACU revenues are even projected to decline by some 23 percent of GDP during 2010/11–2011/12, mainly due to lower imports by South Africa.
While the outlook for 2010 is bleak, the IMF is expecting a major economic recovery from 2011 and onwards. In 2011, Lesotho's GDP growth is projected at 3.2 percent. Growth then will accelerate and reach an impressive rate of 12.1 percent by 2015, the Fund's more optimistic long-term outlook holds.
Government in Maseru is planning tough reforms to improve its economic standing, making IMF analysts optimistic about the long-term outlook. "The ambitious economic program for 2010-13 demonstrates the authorities' commitment to tackling these challenges," commended IMF Acting Chair Naoyuki Shinohara.
Large investments in Lesotho's drought affected agricultural sector are also planned, with massive donor aid. Lesotho has been singled out as one of the countries most affected by the ongoing global warming, now spurring increased donor aid to seek recovery of the kingdom's agriculture.
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