[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"doc-detail-111887-en":3,"doc-seo-111887-105":30,"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":21,"is_downloadable":21,"audit_status":21,"page_count":22,"language":23,"language_code":24,"site_id":25,"html_lang":24,"table_of_contents":26,"faqs":27,"seo_title":13,"seo_description":14,"update_tm":28,"read_time":29},111887,13056703019662,"Evangeline","https://ap-avatar.wpscdn.com/avatar/be000253a8e92610077?_k=1778726343310543188",8,"Research & Report","Kingdom of Lesotho - Joint Bank-Fund Debt Sustainability Analysis - Moderate Risk of External and Overall Debt Distress","Kingdom of Lesotho maintains a moderate risk of external and overall debt distress, with debt-sustainability risks largely unchanged since the previous DSA. FY23/24 fiscal surpluses, supported by strong SACU transfers and higher water royalties, have reduced public debt, but rising contingent liabilities, persistent domestic arrears, and difficulty sustaining current fiscal restraint could raise future debt levels. Debt-to-GDP thresholds are breached only under extreme GDP growth and currency depreciation shocks. The analysis emphasizes fiscal prudence, buffers against volatility, using SACU windfalls and renegotiated water royalties to clear arrears, and improving public financial management and debt strategy to protect sustainability.","Public Disclosure  \nPub lic Disc losure Authorized  \nApproved by:  \nManuela Francisco and Hassan Zaman (IDA) and Andrea Richter Hume and Anna Ivanova (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 broadly unchanged risks to debt sustainability since the last DSA.1 The fiscal surplus in FY23/24 , backed by strong Southern African Customs Union (SACU) transfers and higher water royalties , has lowered public debt. However, risks from rising contingent liabilities, persistent domestic arrears, and difficulty sustaining the current degree of fiscal restraint may put upward pressure on future debt levels. The moderate risk rating suggests limited space to absorb shocks. Debt-to-GDP thresholds are breached under the most extreme shock of GDP growth and of currency depreciation, respectively for public debt and external debt , remaining above the threshold during the entire forecast horizon in both cases. The DSA highlights the importance of continued fiscal prudence to stabilize debt levels, building buffers against future volatility , and the benefits of using the current SACU windfall and increased revenues from the renegotiated water royalties to clear arrears and amortize public debt , to rebuild trust in governance and safeguard against future shocks. Improved efficiency in critical public infrastructure investment is needed to raise productivity and lift Lesotho’s growth outlook. Finally, addressing contingent liability risks, strengthening public financial management, and maintaining a conservative debt management strategy focused on concessional borrowing will be critical for continued debt sustainability.  \n1 This DSA updates the previous Joint DSA from July 2023 (IMF Country Report No. 23/268) . The DSA analysis reflects a debt carrying capacity of Medium considering Lesotho’s Composite Indicator Index of 2.98 , based on the IMF’s April 2024 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 2023 (Text Table 1) . Debt coverage includes both external and domestic obligations.2 The perimeter of the public debt includes the central government, central bank debt taken on behalf of the government, and government-guaranteed debt of state-owned enterprises (SOEs) .3 Debt also includes domestic arrears, estimated at 1 percent of GDP as of March-2024 .4 Starting from FY22/23, the authorities have been publishing the quarterly Debt Transparency Report in agreement with the World Bank under the Sustainable Development Financing Policy (SDFP) . While total SOE debt is not yet available, publicly guaranteed debt on SOEs and private enterprises are available in the report.  \n2. The DSA includes a contingent liability stress test to capture in the assessment extrabudgetary units, SOEs, and financial market shock (Text Table 2) .5 The contingent liability stress test incorporates the following shocks:  \n• The pension fund financing gap—estimated at 7 percent of GDP.6  \n• Liabilities associated with potential asset seizures—estimated at 3.1 percent of GDP.7  \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 goo","cbCaidAGVM0xU8lA","https://ap.wps.com/l/cbCaidAGVM0xU8lA","pdf",656253,2,1,20,"English","en",105,"# Risk Assessment\n## External Debt Distress and Overall Risk\n## Stress Test and Contingent Liabilities\n# Implications and Policy Priorities\n## Fiscal Prudence and Buffers\n## Arrears Clearance and Revenue Use\n## Public Financial Management and Debt Strategy","[{\"question\":\"What is Lesotho’s assessed risk of external and overall debt distress?\",\"answer\":\"Both external debt distress and overall risk of debt distress are assessed as moderate.\"},{\"question\":\"Which factors are supporting debt sustainability in FY23/24?\",\"answer\":\"A fiscal surplus in FY23/24 supported by strong SACU transfers and higher water royalties has lowered public debt.\"},{\"question\":\"What risks could push Lesotho’s future debt levels upward despite the moderate rating?\",\"answer\":\"Rising contingent liabilities, persistent domestic arrears, and challenges in sustaining the current degree of fiscal restraint could increase future debt levels.\"}]",1784492158,50,{"code":4,"msg":31,"data":32},"ok",{"site_id":25,"language":24,"slug":33,"title":13,"keywords":34,"description":14,"schema_data":35,"social_meta":86,"head_meta":88,"extra_data":90,"updated_unix":28},"kingdom-of-lesotho-joint-bank-fund-debt-sustainability-analysis-moderate-risk-of-external-and-overall-debt-distress","",{"@graph":36,"@context":85},[37,53,68],{"@type":38,"itemListElement":39},"BreadcrumbList",[40,44,47,50],{"item":41,"name":42,"@type":43,"position":21},"https://docshare.wps.com","Home","ListItem",{"item":45,"name":46,"@type":43,"position":20},"https://docshare.wps.com/document/","Document",{"item":48,"name":12,"@type":43,"position":49},"https://docshare.wps.com/document/research-report/",3,{"item":51,"name":13,"@type":43,"position":52},"https://docshare.wps.com/document/kingdom-of-lesotho-joint-bank-fund-debt-sustainability-analysis-moderate-risk-of-external-and-overall-debt-distress/111887/",4,{"url":51,"name":13,"@type":54,"author":55,"headline":13,"publisher":57,"fileFormat":60,"inLanguage":24,"description":14,"dateModified":61,"datePublished":62,"encodingFormat":60,"isAccessibleForFree":63,"interactionStatistic":64},"DigitalDocument",{"name":9,"@type":56},"Person",{"url":41,"name":58,"@type":59},"DocShare","Organization","application/pdf","2026-07-21","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},"What is Lesotho’s assessed risk of external and overall debt distress?","Question",{"text":75,"@type":76},"Both external debt distress and overall risk of debt distress are assessed as moderate.","Answer",{"name":78,"@type":73,"acceptedAnswer":79},"Which factors are supporting debt sustainability in FY23/24?",{"text":80,"@type":76},"A fiscal surplus in FY23/24 supported by strong SACU transfers and higher water royalties has lowered public debt.",{"name":82,"@type":73,"acceptedAnswer":83},"What risks could push Lesotho’s future debt levels upward despite the moderate rating?",{"text":84,"@type":76},"Rising contingent liabilities, persistent domestic arrears, and challenges in sustaining the current degree of fiscal restraint could increase future debt 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