…as IMF says ineffective planning and poor project execution undermine infrastructure development
Moroke Sekoboto
THE nation’s economy continues to post weak and volatile growth despite years of high public investment, with the International Monetary Fund (IMF) attributing the poor performance to ineffective planning, budgeting and implementation of capital projects.
According to the IMF’s Lesotho Technical Assistance Report on Public Investment Management Assessment (PIMA), released on Friday, the country has consistently spent around 10 percent of its Gross Domestic Product (GDP) on public investment—well above the average for Sub-Saharan African and other low-income countries. However, this has failed to deliver durable infrastructure or sustained economic growth.
The report notes that GDP per capita remains among the lowest in the region, while Lesotho’s public capital stock has steadily declined since the early 2000s despite continued high levels of capital expenditure.
“The central challenge facing Lesotho is therefore not the volume of public investment, but the effectiveness with which investment spending is planned, allocated, and implemented,” the report states.
The IMF says Lesotho’s high levels of public investment have largely been financed by favourable external funding conditions rather than strong public investment institutions.
It points to large and often volatile Southern African Customs Union (SACU) revenues, together with capital grants—particularly for the Lesotho Highlands Water Project—as having created significant fiscal space without requiring sustained domestic revenue mobilisation or extensive borrowing.
“While this has enabled high levels of capital spending, it has also weakened incentives to strengthen project preparation, budgeting discipline, and implementation capacity,” the report says.
As a result, increased public spending has not been matched by improvements in infrastructure quality or service delivery.
“Infrastructure outcomes in Lesotho remain weak relative to the scale of investment, reflecting low efficiency and persistent implementation bottlenecks. Access to electricity and basic services has improved only gradually, and service quality remains uneven despite sustained capital spending.”
The IMF estimates Lesotho’s public investment efficiency gap at approximately 49 percent in 2019, meaning the country generates significantly less infrastructure output from its investment than more efficient peers.
The report identifies poor budget execution as the biggest obstacle to effective public investment. On average, only about half of the capital budget has been spent in recent years, with execution averaging just 53 percent over the past three fiscal years.
The IMF warns that persistent under-execution has delayed project completion, weakened public service delivery and contributed to the deterioration of the country’s infrastructure assets.
“The persistent under-execution has delayed project completion, weakened service delivery, and contributed to the erosion of the public capital stock, making execution failures the most immediate and binding constraint on the impact of public investment,” the report says.
The assessment also found widespread weaknesses throughout Lesotho’s public investment management system.
Although legal and policy frameworks exist, their implementation remains inconsistent and is constrained by limited technical capacity across government ministries.
“Projects often enter the budget without being fully prepared, prioritised or costed; funding is not predictable or sufficiently protected during implementation; and there is limited active management of the investment portfolio once projects are underway,” the report states.
Compared with other Sub-Saharan African and low-income developing countries, Lesotho performs below average in both the design and implementation of its public investment management framework.
The IMF notes that while budget coordination mechanisms are broadly comparable with regional standards, the country performs poorly in national and sectoral planning, multi-year budgeting, project selection, funding predictability, portfolio management and project implementation.
“These gaps are most pronounced in the downstream stages of the investment cycle, where weaknesses in execution, oversight and active portfolio management limit the impact of public investment,” the report says.
The assessment further found that projects frequently enter the budget without proper appraisal or costing, while medium-term capital expenditure ceilings often differ substantially from final budget allocations.
Funding for ongoing projects is also released late and unpredictably, with payments frequently delayed due to cash rationing and the accumulation of arrears, resulting in repeated project stoppages and implementation delays.
The IMF attributes many of these challenges to weak institutional capacity and poor enforcement of existing procedures, which limit government’s ability to monitor projects effectively and redirect resources where necessary.
To address these shortcomings, the IMF recommends a comprehensive reform programme aimed at strengthening planning, budgeting and project implementation.
Among its key recommendations are strengthening the planning framework and project pipeline, improving project appraisal and transparent selection processes, enhancing multi-year capital budgeting and disclosure of total project costs, and improving procurement systems, cash management and commitment controls.
The report also calls for stronger project monitoring, performance-based budget reallocations, greater audit transparency and improved management of public assets.
“Addressing the key issue of under-execution means raising Lesotho’s absorption capacity,” the report says.
“In practice, this requires a sequenced focus on the binding constraints that most directly prevent budgeted funds from being converted into completed projects. Near-term priorities should therefore centre on getting procurement fully operational and improving funding predictability for ongoing projects.”
The IMF adds that stronger project appraisal, improved planning, enhanced portfolio monitoring and greater transparency will be critical to ensuring that public investment delivers durable infrastructure and stronger economic growth.