On 18 February 2026, the Honourable Minister of Finance and Development Planning, Dr Retšelisitsoe Matlanyane, presented the 2026/2027 National Budget under the theme “Accelerating Economic Transformation; Building Resilience.”
This Budget marks a decisive policy shift from fiscal stabilisation to structural economic transformation. For businesses, investors, financial institutions, and state entities operating in Lesotho, the 2026/27 fiscal framework introduces significant legal, regulatory and commercial implications.
At Mayet & Associates, we analyse below the key legal and economic dimensions of the Budget and what they mean for the private sector.
Macroeconomic Context: From Stabilisation to Structural Reform
The Government has confirmed that although fiscal stabilisation has been achieved in recent years, this is insufficient for long term prosperity. The 2026/27 Budget, therefore, focuses on reducing dependence on SACU revenues, strengthening domestic revenue mobilisation, enforcing disciplined public expenditure, building economic resilience, and shifting toward private sector led growth.
The macroeconomic projections indicate sluggish medium-term growth, continued pressure on textiles and mining, inflation stabilising at approximately 4.5 percent, and a projected fiscal deficit of 3 percent of GDP in 2026/27. For the private sector, this signals a regulatory environment that will emphasise compliance, efficiency, and domestic resource mobilisation.
Fiscal Rules Framework: A Legally Significant Development
One of the most important structural reforms is the adoption of a rules based fiscal framework, including a debt ceiling of 60 percent of GDP, a debt anchor of 50 percent of GDP, an external debt limit of 40 percent of GDP, and a structural deficit target of 3 percent of GDP.
This represents a move toward formal fiscal discipline. From a legal and governance perspective, this has implications for public borrowing, public private partnerships, State Owned Enterprise oversight, infrastructure financing instruments, and contingent liabilities management.
The Government has expressly identified fiscal risks from SOEs and legacy PPP contracts, some with potential exposure of up to 3.8 percent of GDP. A comprehensive audit of such agreements is underway. This creates a likely environment of renegotiation of legacy contracts, stricter PPP structuring, and increased scrutiny of shareholder agreements involving Government participation.
Tax Reform and Revenue Mobilisation
The Budget confirms that amendments to the Tax Administration framework, Income Tax legislation, and VAT administration legislation will be tabled in 2026/27 2026-27.
Government states that the objective is to broaden the tax base and improve efficiency rather than increase the burden on compliant taxpayers. However, businesses should anticipate increased enforcement, digital tax administration, expanded electronic VAT filing systems, enhanced compliance audits, and greater scrutiny of non-tax revenues, fees and penalties.
VAT collections are projected lower due to subdued consumption suggesting enforcement pressure may increase to offset revenue volatility.
Mining Sector Reform
The Minister announced a rules based fiscal stabilisation framework for mining aimed at preserving employment and extending mine life during periods of market stress.
Given the global decline in rough diamond prices and high cost operations in Lesotho, this is a critical development. Potential legal implications include royalty relief mechanisms, revised fiscal terms, mine life restructuring, employment protection obligations, and conditional state support linked to compliance. Mining companies should prepare for structured engagement with Government under a formalised stabilisation model.
Infrastructure Expansion and Procurement Reform
The 2026/27 Budget significantly increases capital expenditure to 19.7 percent of GDP. Major allocations include Energy at M1.7 billion, Water at M2.4 billion, Roads and Buildings at M2.1 billion, and ICT at M386.4 million.
Government also confirms procurement reform, modernised public financial management, strengthened commitment controls, and upgraded treasury systems. For contractors, developers and financiers, this signals increased tender opportunities, tighter compliance and procurement controls, higher documentation standards, and enhanced audit exposure.
Special Economic Zones and Investment Climate Reform
The Budget confirms the finalisation of the Special Economic Zones Bill and continued investment climate reforms. Additional initiatives include the National Single Window for Trade, digital business licensing, border modernisation, industrial hubs, and apparel and textile hub development.
For foreign and local investors, this represents potential tax incentives, regulatory streamlining, enhanced trade facilitation, and opportunities under AfCFTA and SADC.
Corporate Governance and State Participation
The Budget explicitly states that governance instruments such as shareholder agreements should receive special attention and be reviewed where necessary to secure the interests of Government.
This is highly significant. Where Government holds equity or participates in joint ventures, we expect renegotiation of shareholder agreements, stronger reserved matters, enhanced oversight rights, increased compliance requirements, and greater transparency obligations. Businesses in partnership with Government should review governance documentation proactively.
Digital Transformation and Financial Regulation
The Budget places strong emphasis on e Government payments integration, expanded digital platforms, strengthened cybersecurity, and protection of financial platforms and public systems.
Companies operating in regulated sectors should expect increased cybersecurity compliance, digital reporting obligations, and strengthened anti money laundering and counter terrorist financing enforcement. The planned National Risk Assessment under FATF standards, further signals heightened regulatory scrutiny in financial services and corporate structures.
Youth Employment and Labour Market Impact
The declaration of youth unemployment as a National State of Disaster has translated into mandatory 40 percent youth labour participation on government infrastructure projects, expansion of the National Volunteer Corps, and prioritisation of the National Youth Development Bill.
Private firms involved in public contracts may be subject to youth employment quotas and structured apprenticeship frameworks.
Salary Adjustment and Tax Threshold Changes
Public service salaries will increase by 2 percent across the board 2026-27 Budget Speech with tax thresholds adjusted to mitigate bracket creep. This has implications for payroll planning, collective bargaining strategies, employment contract revisions, and budget forecasting for public private engagements.
Strategic Legal Takeaways for Businesses
The 2026/27 Budget is not merely fiscal policy. It is a structural reform agenda with significant legal consequences.
Businesses should review tax compliance frameworks in anticipation of amendments, audit shareholder agreements where Government is a stakeholder, assess exposure to PPP and SOE contractual risk, monitor mining fiscal stabilisation reforms, prepare for digital tax and procurement systems, reassess trade strategy beyond AGOA dependency, and evaluate opportunities in infrastructure, energy and agriculture.
Conclusion
As stated in the Budget Speech, “This is not a Budget of hesitation; it is a Budget of action.”
For Lesotho’s private sector, this action translates into stricter fiscal discipline, stronger governance standards, and increased regulatory modernisation, but also meaningful opportunity in infrastructure, digital transformation, and sectoral diversification.
At Mayet & Associates, we advise corporates, investors, financial institutions, and public entities on navigating regulatory reform, fiscal policy shifts, and governance restructuring in Lesotho and across the region.
For strategic advisory relating to the 2026/27 Budget and its implications for your business, contact our offices in Maseru.