Since 2010, the economy has been performing well with growth of real Gross Domestic Product (GDP) averaging over 5 percent a year and inflation held to single-digit levels. International reserves have recovered to close to five months of import coverage after dipping to 3? months of imports in 2012 in the wake of the balance of payments and fiscal crisis caused by the sharp drop in revenues from the Southern African Customs Union (SACU) in fiscal years 2010/11 and 2011/12.
The recovery from the crisis was achieved with the help of a sustained fiscal adjustment effort supported by the IMF with a three-year arrangement under the Extended Credit Facility (ECF), which was successfully concluded in September 2013.
The economic outlook for Lesotho is positive with strong economic growth and low inflation. Economic activity is expected to be supported by large public investment projects, including the second phase of the Lesotho Highland Water Project. The authorities are also taking steps to strengthen the role of the private sector. However, there are risks, most notably from the high volatility of SACU revenues.
Despite the recent strong growth, unemployment remains high and poverty is widespread, while some social indicators on primary and secondary education and HIV/AIDS highlight the future challenges.