Selected Issues Papers

Setting Up Fiscal Rules in Lesotho: Kingdom of Lesotho

By Qianqian Zhang, Motseki Khiba

October 14, 2025

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Format: Chicago

Qianqian Zhang, and Motseki Khiba. "Setting Up Fiscal Rules in Lesotho: Kingdom of Lesotho", Selected Issues Papers 2025, 140 (2025), accessed October 16, 2025, https://doi.org/10.5089/9798229026659.018

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Summary

Lesotho’s fiscal policy has long been shaped by volatile SACU revenues and persistent expenditure pressures, calling for a more rules-based and forward-looking framework to ensure sustainability. Recent efforts to formalize a fiscal rules framework offer an opportunity to strengthen medium-term planning, anchor debt dynamics, and build resilience to shocks. The proposed framework should center on a debt ceiling of 60 percent of GDP, a debt anchor of 50 percent of GDP, and a structural deficit target of 3 percent of GDP, supported by operational expenditure and wage-bill rules. A savings fund (stabilization fund) should be set up and be anchored on the fiscal rules, serving both stabilization and investment purposes.

Subject: Asset and liability management, Debt limits, Debt sustainability, Expenditure, External debt, Fiscal governance, Fiscal policy, Fiscal rules, Fiscal stance, Fiscal sustainability, Government debt management, Public debt, Public financial management (PFM)

Keywords: Debt ceiling, Debt limits, Debt sustainability, Debt sustainability, Debt sustainability analysis, Fiscal governance, Fiscal reaction function, Fiscal rules, Fiscal rules, Fiscal space, Fiscal stance, Fiscal sustainability, Government debt management, Operational rules, Overdue obligations clearance, Stabilization fund

Publication Details

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