Setting Up Fiscal Rules in Lesotho: Kingdom of Lesotho

Lesotho’s fiscal policy has long been shaped by volatile SACU revenues and persistent expenditure pressures, calling for a more rules-based and forward-looking framework to ensure sustainability.
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Volume/Issue: Volume 2025 Issue 140
Publication date: October 2025
ISBN: 9798229026659
$15.00
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Summary

Lesotho’s fiscal policy has long been shaped by volatile SACU revenues and persistent expenditure pressures, calling for a more rules-based and forward-looking framework to ensure sustainability. Recent efforts to formalize a fiscal rules framework offer an opportunity to strengthen medium-term planning, anchor debt dynamics, and build resilience to shocks. The proposed framework should center on a debt ceiling of 60 percent of GDP, a debt anchor of 50 percent of GDP, and a structural deficit target of 3 percent of GDP, supported by operational expenditure and wage-bill rules. A savings fund (stabilization fund) should be set up and be anchored on the fiscal rules, serving both stabilization and investment purposes.