Minister of Finance and Development Planning, Dr Retšelisitsoe Matlanyane, delivered a sombre assessment of Lesotho’s economic outlook this week as she tabled the 2025/2026 Mid-Term Budget Review before a sparsely attended joint sitting of Parliament.
Matlanyane presented a frank account of stalled capital projects, declining revenues, and widening service delivery gaps, warning that the country was failing to convert its investments into tangible development, jobs, and improved livelihoods.
Dr Matlanyane revealed that government capital spending has collapsed, largely due to the withdrawal of support from the Millennium Challenge Corporation (MCC) and USAID, which has halted billions of maloti in infrastructure investments.
“The most significant contraction has occurred in capital spending. Out of the M10.69 billion allocated for capital projects, only M2.34 billion, or 5.1 percent of GDP was spent by mid-year due to the suspension of the MCC and USAID projects,” Matlanyane said.
“This delayed infrastructure rollout in key sectors such as health, water, and agriculture, sectors crucial for long-term economic growth and job creation,” she added.
The minister continued to report that the government funded projects performed well below the target, with only 18 percent which is M772.4 spent against the M4.28 billion.
She noted that although projects like rural electrification and major road networks progressed, many of those recorded “minimal to zero expenditure reflecting challenges in project readiness and execution that hinder development goals”.
At the start of the current financial year, the government was praised for significantly improving the allocation of funds to the capital budget. But despite this progress on paper, the minister noted that implementation has remained deeply disappointing.
Capital projects, which should be driving employment and improving livelihoods through expanded electrification, new roads, clinics, classrooms, schools, bridges and rehabilitation of existing infrastructure, have failed to record the milestones expected.
“Low capital budget execution represents a failure to convert investment into jobs and infrastructure,” Dr Matlanyane said. “We must be transparent about underperformance in this area and take decisive action to strengthen capital project execution, accountability, and transparency. We must address projects that are lagging behind.”
Every Thursday in parliament, the executive faces a barrage of questions from backbenchers frustrated by collapsing service delivery in their constituencies. Many of these concerns relate directly to capital projects that remain stalled.
Meanwhile, communities continue to endure challenges in accessing basic services such as healthcare, schools, electricity, proper road networks, footbridges and clean water.
The minister reported “increased spending” in construction activities under Lesotho Highlands Water Project Phase II (LHWP II), which she said is expected to provide some stimulus to the economy. She stressed that LHWP II remains the “main engine” of economic growth due to its extensive construction works.
“The sector is performing strongly and sustaining the high growth rates projected in the first quarter of 2025, driven by continued development of the dam, tunnels and associated road networks,” she said.
Earlier this year, Dr Matlanyane reported that the economy grew by 2.5% in 2024/2025, buoyed by a 22.5% expansion in construction, a 3.7% increase in services, and a 3.5% growth in animal farming.
However, several sectors performed poorly. Mining contracted by 5%, manufacturing declined by 2.3%, and the textiles, clothing and footwear subsector suffered an 8.2% collective decline. Crop production also fell by 5.1%.
A 3.4% growth rate had been projected for 2025/2026 when the budget was tabled, but the minister now said the economy was under far more strain than anticipated.
“At the time of approving the budget in February 2025, our outlook was cautiously optimistic. Growth was expected to be driven by construction expanding over 30 percent and steady performance in services and agriculture.”
Revenue collection is also lagging. Of the total revenue projected for 2025/2026 — equivalent to 67.2% of GDP, only M12.87 billion (43.1%) had been collected by mid-year. The year-end projection now stands at M27.53 billion, or 92.3% of the target.
Tax performance remains under pressure.
“Tax revenue, while showing resilience at mid-year, will remain under stress for the remainder of the fiscal year given the subdued macro environment. At mid-year, M5.21 billion had been collected against an annual target of M11.23 billion, representing 46.4 percent performance,” she said.
Dr Matlanyane reiterated government’s commitment to a private sector–led economy.
In an interview with this publication following the minister’s presentation, Public Works and Transport Minister Matjato Moteane, whose ministry oversees most capital projects, blamed excessively long procurement processes for the delays. Moteane added that the ministry was severely understaffed, which was compounding the slow rollout of projects.
Revolution for Prosperity (RFP) MP Dr Tšeliso Moroke expressed deep frustration with the government’s poor performance. Moroke said parliamentary committees had identified inefficiencies and corruption, but the government continued to show little urgency in addressing them.
He criticised the executive for failing to attend the recent SADCOPAC conference and AGM, where governance and corruption were key themes.
He warned that the government must “get its act together” and genuinely partner with Parliament in combating corruption.
Opposition Democratic Congress (DC) MP Katleho Mabeleng also condemned the persistent delays and staff shortages, arguing that the government must urgently fix these problems if national development is to progress. He vowed to continue holding the executive accountable.
Matlanyane also warned that manufacturing, one of Lesotho’s most important industries, was facing severe pressure, particularly due to the uncertainty surrounding renewal of the Africa Growth and Opportunity Act (AGOA).
“The most significant threat is the uncertainty related to AGOA, which would remove the sector’s vital duty-free access to the US market,” she said.
Recent U.S. media reports indicate that Senator John Kennedy has introduced a bill to renew AGOA for two years, though the outcome remains uncertain.
Summary
- Minister of Finance and Development Planning, Dr Retšelisitsoe Matlanyane, delivered a sombre assessment of Lesotho’s economic outlook this week as she tabled the 2025/2026 Mid-Term Budget Review before a sparsely attended joint sitting of Parliament.
- At the start of the current financial year, the government was praised for significantly improving the allocation of funds to the capital budget.
- “The sector is performing strongly and sustaining the high growth rates projected in the first quarter of 2025, driven by continued development of the dam, tunnels and associated road networks,” she said.
Thoboloko Ntšonyane is a dedicated journalist who has contributed to various publications. He focuses on parliament, climate change, human rights, sexual and reproductive health rights (SRHR), health, business and court reports. His work inspires change, triggers dialogue and also promote transparency in a society.
