The Kingdom of Lesotho’s 2005 Article IV Consultation reports that the government’s fiscal position and the external current account have improved markedly. The authorities are preparing an action plan, in collaboration with development partners, to improve the business climate. Critical measures aim to increase labor productivity through training, reduce domestic costs for the private sector by addressing infrastructure bottlenecks, remove regulatory and administrative impediments, improve access to financial services, and promote product and export market diversification.
The following information has become available since issuance of the staff report on August 18, 2005. The thrust of the staff’s assessment remains unchanged.
Consumer price inflation fell to 3.1 percent in June 2005, about 0.5 percentage points lower than the inflation rate at end March, 2005.
The loti exchange rate against the US dollar moved from 6.65 at the end of June to 6.3 in the first week of September, moderating the exchange rate depreciation of the first half of 2005. The effective yield on treasury bills declined further, from 7.7 percent in March to 6.9 percent in June, while the savings deposit rate remained unchanged during the period.
Gross international reserves rose from US$508 million, representing 4.5 months of import coverage at end-March, to US$548 million at end-June, representing 4.8 months of import coverage.
The signing of the Millennium Challenge Corporation (MCC) compact in July was followed by the launching, in September, of feasibility studies for the various programs and projects envisaged under the compact.