Lesotho’s fiscal and external balances have deteriorated as a result of the global economic downturn and a surge in spending. Undertaking key fiscal adjustments to restore macroeconomic stability is necessary for raising Lesotho’s growth potential. Executive Directors commend the measures taken in the budget to reduce expenditure. Further strengthening of debt management and accelerating structural reforms is crucial for raising Lesotho’s growth potential. Strengthening the institutional and regulatory framework for banks and non-bank financial institutions (NBFIs) will help to support financial sector health and stability.