## Setting Up Fiscal Rules in Lesotho: Kingdom of Lesotho

_Selected Issues Papers, October 14, 2025_

## Source details

**Canonical URL:** [Setting Up Fiscal Rules in Lesotho: Kingdom of Lesotho](https://www.imf.org/en/publications/selected-issues-papers/issues/2025/10/14/setting-up-fiscal-rules-in-lesotho-kingdom-of-lesotho-571221)

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## Bibliographic details
- Authors: Qianqian Zhang, Motseki Khiba
- Published: October 14, 2025
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798229026659.018

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### Context and Rationale
- Lesotho’s fiscal policy has long been shaped by volatile SACU revenues and persistent expenditure pressures.
- A more rules-based and forward-looking framework is needed to ensure sustainability, strengthen medium-term planning, anchor debt dynamics, and build resilience to shocks.
- Recent efforts to formalize a fiscal rules framework offer an opportunity to address these vulnerabilities.

### Proposed Fiscal Framework (core elements)
- Debt ceiling of 60 percent of GDP.
- Debt anchor of 50 percent of GDP.
- Structural deficit target of 3 percent of GDP.
- Supportive operational rules:
  - Operational expenditure rule.
  - Wage-bill rule.

### Savings (Stabilization) Fund
- Recommendation to set up a savings fund (stabilization fund).
- The fund should be anchored on the fiscal rules.
- Intended purposes:
  - Stabilization against revenue volatility.
  - Investment purposes.

### Policy Objectives and Expected Benefits
- Anchor debt dynamics via explicit debt ceiling and debt anchor.
- Improve fiscal discipline through a structural deficit target.
- Mitigate the impact of SACU revenue volatility using a stabilization fund tied to the rules.
- Strengthen medium-term planning and forward-looking fiscal management.

### Keywords and Thematic Focus
- Expenditure, Fiscal policy, Fiscal rules, Fiscal stance, Public debt.
- Emphasis on debt ceiling, debt sustainability, expenditure pressure, fiscal reaction function, operational rules, stabilization fund.
- Geographic and institutional scope: Africa; Southern Africa; IMF country; IMF staff; Global.

*Setting Up Fiscal Rules in Lesotho: Kingdom of Lesotho — Qianqian Zhang and Motseki Khiba, October 14, 2025.*

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_Source: https://www.imf.org/en/publications/selected-issues-papers/issues/2025/10/14/setting-up-fiscal-rules-in-lesotho-kingdom-of-lesotho-571221_