Coverage rates of the main poverty reduction initiatives
96
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benefit from any special feature that might distinguish its economy from that of the rest of the region.
Lesotho’s economy is small, with a GDP per capita of US775 in 2009 US1,700 PPP that was ranked 156th in the Human Development Index HDI. GDP per capita has
multiplied by a factor of 13 since Independence, at an average rate of 4.6 per cent per year 2.8 per cent in per capita terms. Lesotho ranks below the sub-Saharan Africa region in
terms of gross national income GNI and its per capita income is half the average among lower-middle income nations.
The country relies heavily on the United States for exports and on South Africa for employment and remittances. Some 59 per cent of total exports go the United States, while
most of the remittances received by Lesotho come from miners working in South Africa. Services account for the biggest share of the economy 58 per cent and agriculture for 7
per cent of GDP. By contrast, 86 per cent of the occupied labour force works in the agriculture sector, but 45 per cent of the total labour force is unemployed. Finally, exports
achieved their highest ever level of 58.2 per cent of GDP in 2002, since when they have decelerated year after year to 47.3 per cent of GDP in 2008.
The Government plays a critical role in Lesotho’s economy. During the second half of the 2000s public spending accounted for 45.6 per cent of the economy, having increased
steadily since 1990 figure 47. Tax revenue followed a similar pattern to expenditure and, with the exception of the period 2000-04, the Government has enjoyed fiscal surpluses.
These surpluses were 8.3 per cent in 2007 and 4.1 per cent in 2008 Ministry of Finance and Development Planning, 2009b.
Figure 47. Lesotho: Public revenue and expenditure as a percentage of GDP 5-year periods, 1990-2008
Source: World Bank, 2010.
The major source of revenue is taxes 89 per cent and, within this group, custom revenue constitutes more than 60 per cent of the total 36.3 per cent of GDP. This strong
dependence on one category of funds, far from declining over the years, has become even more marked, rising from 54.4 per cent in 2004 to 62.0 per cent in 2008 figure 48. The
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participation of VAT, on the other hand, fell between 2004 and 2008 from 17.7 per cent to 12.5 per cent of total taxation figure 48.
Figure 48. Lesotho: Structure of tax revenues, 2008
Source: Ministry of Finance and Development Planning, 2009b.
Important changes in the structure of government spending have emerged during the last five years. First, public expenditure as a percentage of GDP grew quickly, and by 2008 the
Ministry of Finance and Development Planning was able to report a 61.7 per cent participation rate. Second, wages, formerly the most important component, now account
for the third largest share of GDP figure 49, lagging behind goods and services 34.4 per cent and transfers and subsidies 33.5 per cent. As will be seen later, the introduction of a
universal old-age pension programme in 2004 helps to explain the shift in the allocation of public funds.
Figure 49. Lesotho: Structure of public expenditure, 2004 and 2008
Source: Ministry of Finance and Development Planning, 2009b.