## Evaluating Fiscal Rules for Lesotho: Kingdom of Lesotho

_Selected Issues Papers, December 6, 2022_

## Source details

**Canonical URL:** [Evaluating Fiscal Rules for Lesotho: Kingdom of Lesotho](https://www.imf.org/en/publications/selected-issues-papers/issues/2022/12/07/evaluating-fiscal-rules-for-lesotho-kingdom-of-lesotho-526717)

## Other formats

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## Bibliographic details
- Authors: Yibin Mu
- Published: December 6, 2022
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798400226014.018

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### Key findings
- A key challenge for Lesotho is the downward rigidity in public expenditure—which increases when SACU transfers are buoyant but fails to be pared back when they fall.
- Fiscal rules would be of value in Lesotho to:
  - help provide constraints on spending and resist political pressure to overspend,
  - embed fiscal responsibility within the country’s macro-fiscal framework, and
  - ensure debt sustainability.
- The paper evaluates options for fiscal rules for Lesotho, discusses the institutional framework required to help underpin a sound fiscal-rule framework, posits a possible fiscal-rule framework for Lesotho, and offers a roadmap to introduce the framework.

### Institutional and design considerations
- Importance of an institutional framework to underpin fiscal rules, including mechanisms to enforce restraint when revenue (notably SACU transfers) is volatile.
- Need to design rules that account for revenue volatility and avoid entrenching expenditure during periods of buoyant transfers.

### Proposed fiscal-rule framework and roadmap (as described)
- The paper posits a possible fiscal-rule framework tailored to Lesotho’s context (details in the full paper).
- Offers a roadmap to introduce the fiscal-rule framework, including sequencing and institutional prerequisites (details in the full paper).

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_Source: https://www.imf.org/en/publications/selected-issues-papers/issues/2022/12/07/evaluating-fiscal-rules-for-lesotho-kingdom-of-lesotho-526717_