{
  "title": "IMF Executive Board Concludes 2024 Article IV Consultation with Kingdom of Lesotho",
  "publication": "IMF News, September 11, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/09/10/pr-24324-lesotho-imf-executive-board-concludes-2024-article-iv-consultation",
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  "summary": "The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Kingdom of Lesotho.",
  "publishDate": "2024-09-11",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Press Release No. 24/324; IMF Communications Department; September 11, 2024.\n- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Kingdom of Lesotho.\n- Key challenge: ensure windfall revenues are saved wisely and spent strategically amid sizable development needs."
    },
    {
      "heading": "Economic performance and inflation",
      "content": "- GDP growth picked up to 2.2 percent in the 12-month period ending March 2024, compared with 1.6 percent a year earlier.\n- Growth drivers: accelerated construction from the Lesotho Highlands Water Project (LHWP-II).\n- Persistent challenges: high unemployment, sluggish diamond and textile exports, exceptional dry season increasing food-security concerns.\n- Headline (consumer) inflation:\n  - Reached a peak of 8.2 percent in January 2024.\n  - Was 6.5 percent in June 2024.\n  - Increased from 4.5 percent in July 2023 to 6.5 percent in June 2024; rise largely due to exogenous factors expected to fade."
    },
    {
      "heading": "Fiscal and external balances",
      "content": "- Fiscal outcome FY ending March 2024:\n  - Sizable fiscal surplus of 6.1 percent of GDP.\n  - SACU transfers were 10.4 percent of GDP higher than in FY22/23.\n  - Authorities used SACU proceeds to reduce arrears and rebuild deposits at the Central Bank rather than increase the public wage bill.\n- Outlook:\n  - Growth projected to peak at 2.7 percent in the fiscal year ending March 2025.\n  - Another year of windfall SACU transfers (6 percentage points of GDP above the 10-year average) will bolster FY24/25 fiscal and external balances.\n  - SACU transfers projected to fall sharply starting in FY25/26; higher water royalties will help fill the gap.\n  - Medium-term projections:\n    - Fiscal balance projected at a surplus of around 1 percent of GDP.\n    - Current account deficit projected at a modest 2.6 percent."
    },
    {
      "heading": "Monetary policy and financial sector",
      "content": "- Central Bank policy:\n  - Policy rate kept steady at 7.75 percent since May 2023 to support the Loti’s peg to the Rand.\n- Financial conditions:\n  - Private sector credit growth picked up to 12.5 percent in FY23/24, mainly due to construction.\n  - Nonperforming loans eased to 3.8 percent of total loans as of 2023 Q4.\n  - Gross international reserves (months of imports): 4.1 (2020/21); 4.3 (2021/22); 4.0 (2022/23); 5.7 (2023/24); 6.2 (2024/25).\n  - Net international reserves (US$ millions): 718 (2020/21); 846 (2021/22); 671 (2022/23); 755 (2023/24); 916 (2024/25); 1,121 (2025/26); 1,258 (2026/27); 1,343 (2027/28); 1,417 (2028/29); 1,513 (2029/30).\n  - Net international reserves (Percent of M1 Plus): 109 (2020/21); 127 (2021/22); 111 (2022/23); 114 (2023/24); 137 (2024/25); 163 (2025/26); 179 (2026/27); 185 (2027/28); 190 (2028/29); 197 (2029/30)."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Directors agreed with the staff appraisal and welcomed the pickup in growth, while noting substantial challenges: high unemployment, widespread poverty, and sluggish growth.\n- Noted risks: global growth shocks, extreme weather events, uncertain SACU transfers, and commodity price volatility.\n- Fiscal policy recommendations:\n  - Continue fiscal prudence to strengthen foreign exchange reserve coverage, safeguard the peg, and preserve medium-term debt sustainability.\n  - Contain the public wage bill.\n  - Increase spending efficiency.\n  - Prioritize social spending on the most vulnerable.\n  - Establish a well-governed savings framework anchored by a credible fiscal rule, given increased water royalties.\n- Public financial management (PFM):\n  - Strengthen PFM, including passage of PFM-related legislation, improved budget processes, strengthened internal controls, and enhanced financial reporting.\n  - Boost public investment efficiency via a prioritized capital project pipeline with enhanced project management capacity.\n- Monetary and central bank governance:\n  - Monetary policy should focus on price stability and safeguarding the exchange rate peg.\n  - Monitor price dynamics closely and stand ready to adjust policy if inflationary pressures reemerge.\n  - Improve central bank governance and coordinate fiscal and monetary policies closely.\n- Financial sector and inclusion:\n  - Continue monitoring financial sector risks, including nonbank financial sector.\n  - Update national financial inclusion strategy to improve financial intermediation and support private sector growth.\n  - Continue strengthening legal and regulatory frameworks for financial stability and AML/CFT.\n- Structural reforms:\n  - Implement reforms to catalyze job-rich inclusive growth, including improving the business environment, strengthening governance, and reducing corruption risks.\n  - Improve data quality and timeliness to support policymaking."
    },
    {
      "heading": "Selected economic indicators (highlights from table)",
      "content": "- GDP at constant prices (including LHWP-II): -5.3 (2020/21); 1.7 (2021/22); 1.6 (2022/23); 2.2 (2023/24); 2.7 (2024/25); 2.4 (2025/26); 1.9 (2026/27); 2.1 (2027/28).\n- GDP at market prices (Maloti billions): 34.2 (2020/21); 36.0 (2021/22); 38.5 (2022/23); 41.5 (2023/24); 45.2 (2024/25); 48.8 (2025/26); 52.4 (2026/27); 56.1 (2027/28); 60.0 (2028/29); 64.4 (2029/30).\n- GDP at market prices (US$ billions): 2.3 (2020/21); 2.5 (2021/22); 2.8 (2022/23); 2.9 (2023/24).\n- Consumer prices (average): 5.4 (2020/21); 6.5 (2021/22); 8.2 (2022/23); 6.7 (2023/24); 5.8 (2024/25); 5.6 (2025/26); 5.3 (2026/27); 5.1 (2027/28).\n- Current account balance (percent of GDP): -5.7 (2020/21); -9.0 (2021/22); -13.8 (2022/23); -0.2 (2023/24); -0.7 (2024/25); -2.3 (2025/26); -2.9 (2026/27); -2.5 (2027/28).\n- Public debt (Percent of GDP): 54.7 (2020/21); 58.4 (2021/22); 64.5 (2022/23); 61.5 (2023/24); 59.9 (2024/25); 59.7 (2025/26); 59.8 (2026/27); 59.5 (2027/28).\n- Revenue (Percent of GDP): 54.4 (2020/21); 44.6 (2021/22); 56.5 (2022/23); 63.4 (2023/24); 61.1 (2024/25); 57.8 (2025/26); 55.6 (2026/27); 54.8 (2027/28).\n- SACU transfers (Percent of GDP): 26.2 (2020/21); 16.7 (2021/22); 14.0 (2022/23); 25.6 (2023/24); 19.3 (2024/25); 18.5 (2025/26); 17.5 (2026/27).\n- Overall balance (Percent of GDP): -5.4 (2020/21); -5.5 (2021/22); 6.1 (2022/23); 0.8 (2023/24); 0.5 (2024/25).\n\nPress Release No. 24/324, IMF Communications Department, September 11, 2024.\n\n---\n\n\n References\n\n- Kingdom of Lesotho and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/09/10/pr-24324-lesotho-imf-executive-board-concludes-2024-article-iv-consultation"
    }
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    "Published: September 11, 2024",
    "Press Release No. 24/324; IMF Communications Department; September 11, 2024.",
    "The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Kingdom of Lesotho.",
    "Key challenge: ensure windfall revenues are saved wisely and spent strategically amid sizable development needs.",
    "GDP growth picked up to 2.2 percent in the 12-month period ending March 2024, compared with 1.6 percent a year earlier.",
    "Growth drivers: accelerated construction from the Lesotho Highlands Water Project (LHWP-II).",
    "Persistent challenges: high unemployment, sluggish diamond and textile exports, exceptional dry season increasing food-security concerns.",
    "Headline (consumer) inflation:",
    "Fiscal outcome FY ending March 2024:",
    "Outlook:",
    "Central Bank policy:",
    "Financial conditions:",
    "Directors agreed with the staff appraisal and welcomed the pickup in growth, while noting substantial challenges: high unemployment, widespread poverty, and sluggish growth.",
    "Noted risks: global growth shocks, extreme weather events, uncertain SACU transfers, and commodity price volatility.",
    "Fiscal policy recommendations:",
    "Public financial management (PFM):",
    "Monetary and central bank governance:",
    "Financial sector and inclusion:",
    "Structural reforms:",
    "GDP at constant prices (including LHWP-II): -5.3 (2020/21); 1.7 (2021/22); 1.6 (2022/23); 2.2 (2023/24); 2.7 (2024/25); 2.4 (2025/26); 1.9 (2026/27); 2.1 (2027/28).",
    "GDP at market prices (Maloti billions): 34.2 (2020/21); 36.0 (2021/22); 38.5 (2022/23); 41.5 (2023/24); 45.2 (2024/25); 48.8 (2025/26); 52.4 (2026/27); 56.1 (2027/28); 60.0 (2028/29); 64.4 (2029/30).",
    "GDP at market prices (US$ billions): 2.3 (2020/21); 2.5 (2021/22); 2.8 (2022/23); 2.9 (2023/24).",
    "Consumer prices (average): 5.4 (2020/21); 6.5 (2021/22); 8.2 (2022/23); 6.7 (2023/24); 5.8 (2024/25); 5.6 (2025/26); 5.3 (2026/27); 5.1 (2027/28).",
    "Current account balance (percent of GDP): -5.7 (2020/21); -9.0 (2021/22); -13.8 (2022/23); -0.2 (2023/24); -0.7 (2024/25); -2.3 (2025/26); -2.9 (2026/27); -2.5 (2027/28).",
    "Public debt (Percent of GDP): 54.7 (2020/21); 58.4 (2021/22); 64.5 (2022/23); 61.5 (2023/24); 59.9 (2024/25); 59.7 (2025/26); 59.8 (2026/27); 59.5 (2027/28).",
    "Revenue (Percent of GDP): 54.4 (2020/21); 44.6 (2021/22); 56.5 (2022/23); 63.4 (2023/24); 61.1 (2024/25); 57.8 (2025/26); 55.6 (2026/27); 54.8 (2027/28).",
    "SACU transfers (Percent of GDP): 26.2 (2020/21); 16.7 (2021/22); 14.0 (2022/23); 25.6 (2023/24); 19.3 (2024/25); 18.5 (2025/26); 17.5 (2026/27).",
    "Overall balance (Percent of GDP): -5.4 (2020/21); -5.5 (2021/22); 6.1 (2022/23); 0.8 (2023/24); 0.5 (2024/25).",
    "[Kingdom of Lesotho and the IMF](http://www.imf.org/external/country/LSO/index.htm)",
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