The 2025/26 National Budget of Lesotho marks a strategic inflection point in the country’s shift from state-led development to a private sector-driven economy. This article analyses the legal and regulatory dimensions of the budget, with emphasis on public financial management reforms, labour and social protection legislation, investment regulation, fiscal decentralisation, and inclusive growth strategies. It also explores Lesotho’s compliance with international obligations, particularly anti-money laundering standards and sustainable development goals, positioning the speech as both an economic roadmap and a legislative reform agenda.
Framed under the theme “Building Strategies for Inclusive Growth”, the budget outlines a comprehensive legal and institutional framework for transitioning from a government-led to a private sector-led economy. It emphasizes fiscal prudence, legal certainty, and investment-friendly regulation.
Central to the budget is the introduction of fiscal rules, the operationalisation of a debt-to-GDP anchor, and implementation of the IMF’s Public Investment Management Information System. The ERM Policy and the forthcoming SOE Policy aim to institutionalize accountability in state-owned enterprises. Further reforms include the introduction of e-procurement, enhanced powers for the Audit Office, and surprise audits, intended to curb corruption and enhance compliance with the Prevention of Corruption and Economic Offences Act.
Significant reforms in labour law are proposed through the Labour Act 2024 and Occupational Safety and Health Act 2024, with implementation by two newly established directorates. A National Social Security Bill will be introduced in 2025/26, establishing a contributory benefits system to support vulnerable workers, particularly in the textile and manufacturing sectors. With youth unemployment at 39%, the budget introduces legal and programmatic interventions, such as the Inclusive Growth Fund, aimed at supporting youth and women led enterprises.
In terms of investment and the regulatory environment, the budget proposes the enactment of a new Investment Law, streamlining the legal regime governing land markets and business registration, and improving investor protection. The Partial Credit Guarantee Facility is undergoing legal consolidation, with implications for creditor rights and financial access. Three key bills the Income Tax Bill, VAT Bill, and Tax Administration Bill will modernise Lesotho’s revenue laws by broadening tax bases and introducing digital collection systems.
To ensure fiscal sustainability, the government plans to adopt a new Public Debt Rule, as total debt stands at M23.1 billion. While royalties from the Lesotho Highlands Water Project offer increased revenue, the volatility of SACU receipts underscores the need for diversified income streams. The VAT registration threshold has been raised to M2 million in support of SMMEs, while adjustments to income tax thresholds and rebates, as well as the introduction of levies on plastic, alcohol, tobacco, and oil, aim to broaden the tax base.
Environmental and climate related priorities feature prominently in the budget. Lesotho has made legal commitments to the Local Climate Adaptive Living Facility and is reviewing the Lesotho Highlands Water Treaty to align with international environmental law. The plastic levy and investment in forestry related industries reflect a turn toward green fiscal policy. Legislative responses to climate induced disasters include land rehabilitation and catchment management initiatives.
Digital transformation is another key focus area. Forthcoming legislation will address Artificial Intelligence, Data Management, and Cybersecurity to enable Lesotho’s participation in the digital economy. The establishment of the Government Security Operations Centre and adherence to international data governance standards signal institutional strengthening in the ICT sector.
In fulfilment of international obligations, the budget places emphasis on compliance with FATF recommendations to combat money laundering and terrorism financing. Policy reforms also address cross-border trade and migration, including the institutionalisation of the Bi-National Commission with South Africa and the review of Lesotho’s migration laws.
Constitutional reform and governance remain high on the agenda. The government has recommitted to the Omnibus Bill, which forms part of a broader reform initiative aimed at democratic consolidation. Strengthening judicial oversight and legislative functions is also prioritised, evidenced by increased parliamentary funding and the hosting of the SADCOPAC conference to promote regional legislative best practices.
The 2025/26 Budget Speech demonstrates a constitutionalist approach to development planning, grounded in the rule of law, social justice, and legislative reform. The budget proposals serve not only as fiscal tools but as instruments of broader legal transformation across labour, tax, investment, social protection, and environmental law. For legal scholars and policymakers, the speech presents a comprehensive blueprint for aligning public finance with democratic governance and sustainable development in Lesotho.