[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"doc-detail-110305-en":3,"doc-seo-110305-105":29,"detail-sidebar-cat-0-en-105":91},{"code":4,"msg":5,"data":6},0,"success",{"doc_id":7,"user_id":8,"nickname":9,"user_avatar":10,"doc_module":4,"category_id":11,"category_name":12,"doc_title":13,"doc_description":14,"doc_content":15,"file_id":16,"file_url":17,"file_type":18,"file_size":19,"view_count":20,"is_deleted":4,"is_public":20,"is_downloadable":20,"audit_status":20,"page_count":21,"language":22,"language_code":23,"site_id":24,"html_lang":23,"table_of_contents":25,"faqs":26,"seo_title":13,"seo_description":14,"update_tm":27,"read_time":28},110305,4810365810221,"Aurora","https://ap-avatar.wpscdn.com/davatar_155a257f0dc6eb9ab79c44ca47cae57d",8,"Research & Report","KINGDOM OF LESOTHO - JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS - Moderate Risk Assessment","Lesotho’s risk of external and overall debt distress remains moderate, unchanged broadly since the last Debt Sustainability Analysis. Expected gains from a surge in SACU transfers should improve the fiscal balance in FY22/23 and stabilize public debt in the medium term. However, contingent liabilities, exchange-rate depreciation, and persistent domestic arrears raise sustainability risks. Baseline indicators stay below thresholds, while stress tests show vulnerabilities: PV of public debt-to-GDP and PV of PPG external debt-to-GDP can breach thresholds under contingent liability, current transfers, exchange-rate, and export shocks.","Public Disclosure  \nPub lic Disc losure Authorized  \nApproved by:  \nAsad Alam and Manuela Francisco (IDA) Andrea Richter Hume and Bergljot Barkbu (IMF) .  \nPrepared by the staff of the International Development Association (IDA) and the International Monetary Fund (IMF) .  \n\n| KINGDOM OF LESOTHO: JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS |  |\n| --- | --- |\n| Risk of external debt distress | Moderate |\n| Overall risk of debt distress | Moderate |\n| Granularity in the risk rating | Limited space |\n| Application of judgment | No |\n\nLesotho’s risk of external and overall debt distress remains moderate, with risks to debt sustainability broadly unchanged since the last DSA.0.1 The surge in SACU transfers is expected to improve the fiscal balance in FY22/23 and help stabilize the public debt burden in the medium term. However, growing risks to debt from unaddressed contingent liabilities, exchange rate depreciation, and persistent domestic arrears, elevate debt sustainability risks. While debt indicators remain below their thresholds under the baseline scenario, stress tests indicate that both the PV of public debt-to-GDP and PV of PPG external debt-to-GDP are vulnerable to contingent liability, current transfers-toGDP, exchange rate, and export shocks, breaching their thresholds in the near term. The moderate risk rating suggests limited space to absorb shocks. The use of windfall external transfers to amortize public debt over the medium term is critical to create a buffer against future volatility and setbacks in reform implementation. Improved efficiency on critical public infrastructure investment is needed to raise productivity and lift the growth outlook. Finally, addressing contingent liability risks, strengthening public financial management, and introducing robust and enforceable fiscal rules will be critical for maintaining debt sustainability.  \n1 This DSA updated the previous Joint DSA from May 2022 (IMF Country Report No. 22/161) . The DSA analysis reflects a debt carrying capacity of Medium considering Lesotho’s Composite Indicator Index of 2.86, based on the IMF’s April 2023 World Economic Outlook and the 2022 World Bank Country Policy and Institutional Assessment (CPIA) .  \n1. The coverage of the DSA remains broadly same since the last DSA in 2022 (Text Table 1) .  \nDebt coverage includes both external and domestic obligations. 1F2 The perimeter of the public debt includes the central government, central bank debt taken on behalf of the government, and governmentguaranteed debt of SOEs.2F3 Debt also includes domestic arrears, estimated at 1.8 percent of GDP as of March-2023 .3F4 The authorities have started publishing the Debt Transparency Report on the website of the Ministry of Finance Development and Planning in FY22/23 in agreement with the World Bank under the Sustainable Development Financing Policy (SDFP) . The report also includes government-guaranteed debt of SOEs but total SOE debt is not available.  \n2. The DSA includes a contingent liability stress test to capture extrabudgetary units, SOEs, and financial market shocks in the assessment (Text Table 2) .4F5 The contingent liability stress test incorporates the following shocks:  \n• The pension fund financing gap—estimated at 7.4 percent of GDP.5F6  \n• Liabilities associated with potential asset seizures—estimated at 2.5 percent of GDP.6F7  \n• 5 percent of GDP for a financial market shock that exceeds the existing stock of banks’ NPLs.  \n2 Definition of external/domestic debt is based on currency principle as the data on residency basis is not available and there are neither locally-issued FX-denominated debt nor significant foreign holdings of local currency debt.  \n3 The DSA does not include the central bank’s net liability to the IMF SDR department in line with the Guidance Note for Fund Staff on the Treatment and Use of SDR Allocations (July 28, 2021) .  \n4 Arrears to providers of goods and services to the government have been accumulating as Minist","cbCaiqEHbuqd5aQS","https://ap.wps.com/l/cbCaiqEHbuqd5aQS","pdf",1036278,1,19,"English","en",105,"# Risk Assessment Summary\n## External Debt Distress and Overall Risk\n## Stress Tests and Vulnerabilities\n# Debt Coverage and Scope\n## Public Debt Perimeter\n## Domestic Arrears and Debt Transparency\n# Contingent Liability Stress Test\n## Pension Fund Financing Gap\n## Potential Asset Seizures\n## Financial Market Shock","[{\"question\":\"How does Lesotho’s current debt distress risk compare with the previous DSA?\",\"answer\":\"Both external and overall debt distress risk remain moderate, broadly unchanged since the last DSA.\"},{\"question\":\"Which factors increase debt sustainability risks despite moderate ratings?\",\"answer\":\"Unaddressed contingent liabilities, exchange-rate depreciation, and persistent domestic arrears elevate sustainability risks.\"},{\"question\":\"What do the stress tests indicate about debt sustainability under shocks?\",\"answer\":\"While baseline indicators remain below thresholds, stress tests show the PV of public debt-to-GDP and PV of PPG external debt-to-GDP are vulnerable and can breach thresholds near term under several shocks.\"}]",1784484813,48,{"code":4,"msg":30,"data":31},"ok",{"site_id":24,"language":23,"slug":32,"title":13,"keywords":33,"description":14,"schema_data":34,"social_meta":86,"head_meta":88,"extra_data":90,"updated_unix":27},"kingdom-of-lesotho-joint-bank-fund-debt-sustainability-analysis-moderate-risk-assessment","",{"@graph":35,"@context":85},[36,53,68],{"@type":37,"itemListElement":38},"BreadcrumbList",[39,43,47,50],{"item":40,"name":41,"@type":42,"position":20},"https://docshare.wps.com","Home","ListItem",{"item":44,"name":45,"@type":42,"position":46},"https://docshare.wps.com/document/","Document",2,{"item":48,"name":12,"@type":42,"position":49},"https://docshare.wps.com/document/research-report/",3,{"item":51,"name":13,"@type":42,"position":52},"https://docshare.wps.com/document/kingdom-of-lesotho-joint-bank-fund-debt-sustainability-analysis-moderate-risk-assessment/110305/",4,{"url":51,"name":13,"@type":54,"author":55,"headline":13,"publisher":57,"fileFormat":60,"inLanguage":23,"description":14,"dateModified":61,"datePublished":62,"encodingFormat":60,"isAccessibleForFree":63,"interactionStatistic":64},"DigitalDocument",{"name":9,"@type":56},"Person",{"url":40,"name":58,"@type":59},"DocShare","Organization","application/pdf","2026-07-22","2026-07-19",true,{"@type":65,"interactionType":66,"userInteractionCount":20},"InteractionCounter",{"@type":67},"ViewAction",{"@type":69,"mainEntity":70},"FAQPage",[71,77,81],{"name":72,"@type":73,"acceptedAnswer":74},"How does Lesotho’s current debt distress risk compare with the previous DSA?","Question",{"text":75,"@type":76},"Both external and overall debt distress risk remain moderate, broadly unchanged since the last DSA.","Answer",{"name":78,"@type":73,"acceptedAnswer":79},"Which factors increase debt sustainability risks despite moderate ratings?",{"text":80,"@type":76},"Unaddressed contingent liabilities, exchange-rate depreciation, and persistent domestic arrears elevate sustainability risks.",{"name":82,"@type":73,"acceptedAnswer":83},"What do the stress tests indicate about debt sustainability under shocks?",{"text":84,"@type":76},"While baseline indicators remain below thresholds, stress tests show the PV of public debt-to-GDP and PV of PPG external debt-to-GDP are vulnerable and can breach thresholds near term under several 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