African Development Bank Group Board Approves New Strategy to Drive Economic Diversification and Private Sector-led Inclusive Growth in Lesotho

The approval comes at a crucial moment for the landlocked country, which continues to face major development challenges, including the impact of a recent 15 percent U.S. tariff on apparel exports, the loss of Official Development Assistance following the cancellation of the $300 million Millennium Challenge Corporation compact, and its reliance on regional economic performance. Nearly half of Lesotho’s population lives in poverty, and youth unemployment remains close to 39 percent.  The new strategy aims to address these vulnerabilities by unlocking private sector growth, creating sustainable employment, and building stronger institutions.

“Lesotho stands at a critical juncture,” said Moono Mupotola, the Bank Group’s Deputy Director General for Southern Africa and Country Manager for Lesotho. “This comprehensive strategy leverages the country’s abundant water resources, strategic location, and demographic dividend to unlock new pathways for inclusive growth and economic diversification.”

The strategy centers on two main priorities: building sustainable infrastructure to drive industrialization and strengthening institutional and human capacities to enhance competitiveness. Key targets include achieving universal electricity access by 2030 through the Mission 300 program, reducing broadband costs to foster a thriving tech start-up ecosystem, and expanding safe drinking water access to thousands more households.

The Bank will also support water and agricultural infrastructure to boost productivity, while also helping the government modernize tax collection systems and strengthen public sector management capacity with new training programs for civil servants.

Catalyzing Private Sector Growth

The Bank will back policy reforms and infrastructure investments that reduce the cost of doing business, expand funding for digital innovation and promote entrepreneurship. Support will be directed to startups and small businesses, including women- and youth-led enterprises, while skills development programs are expected to equip 20,000 young people– 40 percent of them women– with the digital skills required for the modern economy.

With Lesotho highly vulnerable to climate shocks, the Strategy incorporates measures to scale up climate-smart agriculture, strengthen disaster risk management, and expand investments in renewable energy and water infrastructure. These initiatives are designed not only to safeguard livelihoods but also to tackle pressing social issues, such as reducing child stunting, which affects more than a third of children under five.

 Regional Integration Focus

The Bank will help position Lesotho to benefit from integration with larger markets by supporting cross-border infrastructure links to South Africa, trade facilitation under the African Continental Free Trade Area (AfCFTA),  and participation in the regional value chain, particularly in agro-processing. By improving connectivity and reducing economic isolation, the strategy seeks to expand opportunities for Lesotho’s businesses and workers beyond its borders.

The new Country Strategy Paper builds on the lessons of past Bank operations in Lesotho and emphasizes integrated, multisectoral approaches, stronger implementation capacity, and proactive portfolio management. It aligns with Lesotho’s National Strategic Development Plan II (2018-2028), the African Development Bank’s Ten-Year Strategy (2024-2033), the African Union’s Agenda 2063 (https://apo-opa.co/46za6PF), and the United Nations Sustainable Development Goals. To deliver results, the Bank will draw on multiple financing windows, including its concessional African Development Fund, the Regional Operations Window, and the Climate Action Window, while working in close partnership with other development institutions.

About the African Development Bank Group:
The African Development Bank Group is Africa’s premier development finance institution. It comprises three distinct entities: the African Development Bank (AfDB), the African Development Fund (ADF) and the Nigeria Trust Fund (NTF). On the ground in 41 African countries with an external office in Japan, the Bank contributes to the economic development and the social progress of its 54 regional member states. For more information: www.AfDB.org