Lesotho
- Total external debt: $689.7 million
- Total external debt payments: gives $54.2 million each year to the rich world in debt payments.
- Population: 1.8 million
- Percentage of adults who can read and write: 82.2%
- Average life expectancy: 42.6 years
- HIV prevalence: 23.2%
- Total health spending: 2.4% of GDP (2003)
- Total spending on debt service payments: 3.7% of GDP
- Annual GDP: $1.5 billion
Background
Lesotho is a small country in Southern Africa and is completely landlocked by South Africa. The country is most highlands and is a difficult country to live in as many of the villages are only accessible by horseback. It has limited natural resources and a narrow production and export base.
Aside from subsistence agriculture, the garment sector plays a critical. The economy is highly open, with imports amounting to about 90 percent of GDP, and depends heavily on inflows of workers’ remittances and receipts from the Southern African Customs Union (SACU).
History
Lesotho was originally named Basutoland, but upon gaining independace from Britain in 1966 it changed its name to the Kingdom of Lesotho. Since gaining independence Lesotho has had a turbulent and troubled time, with several parties including the Royal family, the army and others competing for power in a number of coups. Lesotho, as a constitutional monarchy, is ruled by a King and governed by a 33-member senate and a 120-member National Assembly.
Where has the debt come from?
The dependence on imports feeds a current account deficit, which is compounded by a range of other economic problems. Agricultural production has been hampered by drought followed by excessive rains in early 2006 that also damaged roads and bridges in rural areas; manufacturing is vulnerable to external shocks; and unemployment is over 25%.
One example from Lesotho’s debt portfolio is the mega $10 billion Lesotho Highlands Water Project (LHWP) is a major dam that benefits mainly urban South Africans in Gauteng and South African farmers who receive subsidised water. Many people have been displaced and the compensation process has been fraught with corruption. Despite this, Lesotho is faced with having to repay the debt incurred as a result of the project.
Debt cancellation status
Lesotho is officially classed as a low income country by the World Bank. It is considered to have a 'sustainable' debt: this is measured by the size of external debt in comparison to the value of exports, without taking into account domestic debt or what Lesotho needs to spend on tackling poverty. It is therefore not eligible for the Heavily Indebted Poor Countries initiative or the Multilateral Debt Relief Initiative. It is theoretically eligible for additional debt assistance from the UK, but has not met the conditions required to qualify.
Sources of information
World Bank
Last updated: April 2008