Lesotho unveils 2025/26 Budget with focus on economic diversification and growth

RETHABILE MOHONO

MASERU – Government on Wednesday tabled the 2025/26 national budget under the theme “Building Strategies for Inclusive Growth.” Minister of Finance and Development Planning, Dr Retšelisitsoe Matlanyane, presented the budget to parliament, emphasizing economic diversification, private sector development, and fiscal prudence to drive sustainable growth and social equity.

Looking at the economic outlook, Dr Matlanyane clarified that global economic growth is expected to stabilize at 3.3 percent in 2025/26, with major economies such as the United States (2.7 percent), China (4.6 percent), and India (6.5 percent) projected to sustain positive momentum.

She mentioned that Lesotho’s economy recorded a growth rate of 2.5 percent in 2024/25, with a forecasted rise to 3.4 percent in 2025/26, mainly driven by a robust construction sector.

However, she indicated that challenges persist in the mining (-5.0 percent), manufacturing (-2.3 percent), and agricultural (-5.1 percent) sectors, which require strategic interventions.

“Inflation is expected to moderate from 6.0 percent in 2024/25 to 5.4 percent in 2025/26, alleviating cost-of-living pressures for consumers,” she said.

Speaking about fiscal performance and revenue projections, the finance minister explained that the government has projected total revenue of M26.5 billion, with major sources including: Southern African Customs Union (SACU) receipts: M9.2 billion, Domestic taxes: M10.9 billion and Non-tax revenue: M6.4 billion.

However, she indicated that expenditure for the fiscal year is estimated at M33.6 billion, with M18.8 billion allocated to recurrent spending and M5.3 billion to capital investment projects.

“Despite the expenditure increase, the country expects to maintain a fiscal surplus of 2.3 percent of GDP,” she said.

She further listed key investment priorities as economic growth and job creation. She also listed agriculture, which is allocated M1.3 billion, a slight decrease from last year.

“The agriculture sector, with an allocated budget of M1.3 billion, plays a vital role in ensuring food security, fostering rural development, and contributing to economic growth. To enhance effective farmer support, the government recognizes the need for reliable data to inform such decisions.

To this end, the government intends to establish the Lesotho Integrated Agriculture Information Management System (LIAMIS), through which farmers will be profiled accordingly.”

“This system will serve as a robust and efficient tool for providing smart subsidies on agricultural inputs via e-vouchers and agricultural insurance, using a well-informed, digitalized farmers’ database,” she said.

She also highlighted tourism among priorities, with an allocation of M207.2 million, and mentioned the need for new tourism development strategies, accreditation programs, and cultural heritage promotion.

On the other hand, trade and industry are allocated M423.8 million for the development of Special Economic Zones (SEZs) and industrial policies to boost private sector investment and MSME growth.

Speaking about mining, one of the struggling industries, she highlighted the issuance of new prospecting licenses and the promotion of artisanal mining to create employment opportunities.

Dr Matlanyane also emphasized science and technology, stating that the country needs to focus on digital transformation, artificial intelligence (AI) policy implementation, and the expansion of broadband infrastructure.

On social services and human capital development, she allocated M3.1 billion to health and mentioned the need to strengthen primary healthcare, introduce digital X-ray technology, and progress towards universal health coverage.

Education is allocated M3.3 billion, with a focus on the expansion of vocational training, bursary reforms, and increased digitalization in classrooms.

“The government is committed to accelerating the digitalization of pre-primary, primary, and secondary education. We have already built the capacity of 400 teachers to conduct classroom sessions using digital platforms. In addition, to improve the competencies of learners advancing to post-secondary education, we have introduced and commenced the pilot of the Lesotho Advanced Secondary Certificate (LASC) at the secondary level.”

“To meet the country’s skills needs, the government is expanding vocational education and training systems through the implementation of the approved three-tier model, which includes academic, technical, and vocational education streams,” she said.

Social protection is allocated M1.5 billion for youth empowerment programs and the adoption of digital payment systems for government grants.

On infrastructure and energy investments, transport and buildings are allocated M3.2 billion for road rehabilitation, airport renovations, and modernization of border posts.

Water resources are allocated M2.2 billion for the implementation of water catchment management systems, irrigation projects, and the expansion of urban water supply. Energy is allocated M1.5 billion to support solar power expansion, hydropower facility upgrades, and the extension of rural electrification projects.

Speaking on governance and financial management, public financial management emphasis was placed on the introduction of digital tax collection systems and measures to enhance debt sustainability.

For the modernization of military and policing services, security is allocated M717.7 million.

ICT is allocated M381.1 million for the expansion of e-government services, cybersecurity initiatives, and improvements in media infrastructure.

Anti-corruption and state-owned enterprise (SOE) reforms will focus on strengthening oversight frameworks and governance systems for state-owned enterprises.

Despite the progressive economic agenda, she said Lesotho faces several risks, including: Overreliance on SACU revenue (27.8 percent of GDP), which remains volatile, high youth unemployment of 39 percent, disproportionately affecting women, fiscal pressures from the public wage bill (17.8 percent of GDP), limiting fiscal flexibility, climate change risks impacting agriculture and other key sectors and the need for regulatory reforms to improve investment attractiveness, among others.

She concluded that the 2025/26 budget sets out a clear roadmap to drive economic transformation, fiscal sustainability, and social equity. The government’s commitment to diversifying revenue sources, investing in infrastructure and human capital, and enhancing governance systems aims to position Lesotho on a path to long-term prosperity.

The success of these initiatives will largely depend on effective implementation and collaboration between the government, private sector, and development partners.