Maseru, Mar.02 — Despite the reported high wage bill, the government’s overall financial status is said to have improved in recent years supported by strong Southern African Customs Union (SACU) receipts and high water royalties.
This surfaced in the budget presentation for 2026/27 by Dr. Rets’elisitsoe Matlanyane where she said though this has provided temporary relief, it has also underscored a clear reality that public finances remain highly exposed to external and cyclical revenues.
She said the Government’s fiscal strategy is anchored on three objectives thus maintaining macro-fiscal stability, reducing vulnerability to revenue volatility and creating durable fiscal space for growth-enhancing investment and human development.
She noted that within this framework, fiscal policy will be guided by the structural balance rather than temporary windfalls to avoid pro-cyclical spending and protect future budgets.
Moreover, she said to strengthen resilience, government will institutionalize mechanisms to save a portion of windfall SACU and mineral related revenues while allowing transparent and measured use during periods of economic stress.
She explained that this approach will smooth expenditure, protect priority programmes and enhance fiscal credibility including through the finalization of regulations to establish a fiscal stabilization fund.
On the other hand, she said reducing dependence on SACU remains a central pillar of this strategy saying government will intensify domestic revenue mobilization through strengthened tax administration, improved compliance and modernized payment systems to reduce leakages.
She said the focus will be on broadening the tax base and improving efficiency rather than increasing the burden on compliant taxpayers or vulnerable households.
Furthermore she mentioned that non-tax revenues will also be looked into while fees, charges and resource-based revenues will be managed with greater transparency and predictability to ensure fair and reliable returns from public assets.
She added that the Government is actively engaging South Africa on the review of water royalty framework under the Lesotho Highlands Water arrangements to better reflect the economic value of this strategic national resource, evolving cost structures and long-term sustainability in a cooperative and mutually beneficial manner.
Meanwhile the Tax Administration Bill Amendments, Income Tax Amendments and VAT Administration Bill will be tabled in the 2026/27 financial year.
Lesotho’s public sector wage bill is among the highest in the region estimated at roughly 17 percent of GDP and over 30 percent of total public expenditure, which is deemed fiscally unsustainable.
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