World Bank Supports Poverty Reduction in Lesotho

Contacts

In Maseru: Husam Abu Dagga +266-22-217-000   

habbudagga@worldbank.org 

In Pretoria: Mallory Saleson +27-431-3100

msaleson@worldbank.org

WASHINGTON, May 22, 2008 – The Board of Directors of the World Bank approved today a grant in the amount of  US$7.2 million and credit* of US$8.7 million for the Government of Lesotho (GOL) for the first ever Poverty Reduction Support Credit (PRSC).

The PRSC-1 is the first in a series of operations supporting the implementation of the government’s Poverty Reduction and Growth Strategy.  The operation is part of a joint effort by development partners in Lesotho to provide predictable and performance- related budget support to the GOL within a unified framework.  The other development partners are the European Union, United Kingdom (DFID), African Development Bank (AfDB) and Ireland (Irish Aid).  Germany (GTZ) has also been engaged in the process and will provide its support through technical assistance in some of the reform areas identified.

The PRSC-1 will support GOL reform efforts in the following areas:

1. Addressing its growth agenda, focusing on improving the business environment and improving the quality of information for decision making;
2. Enhancing the effectiveness of public expenditures and sharpening the strategic focus of the budget by strengthening its link with the Poverty Reduction and Growth Strategy and the macroeconomic and budget framework; and
3. Improving service delivery in key sectors by enhancing access and quality and capacity to deliver services at all levels of Government.

“The proposed operation is an integral part of the Bank’s Country Assistance Strategy for Lesotho and will help improve the quality of life of the Basotho people. The operation will contribute to strengthening the business environment and promoting economic diversification leading to broad-based and employment-generating growth,” says Senior Country Economist, Preeti Arora.

The PRSC will support service delivery at the central and local level and enhance the oversight of public finances and the procurement and financial management systems.  This will result in increasing the efficiency and effectiveness of public sector spending, which currently accounts for about 50 percent of GDP.

Arora notes the PRSC will also contribute to greater alignment with key donors and Government systems. “It is designed to strengthen and support domestic accountability, reduce transaction costs and develop and use Lesotho’s own systems rather than setting up and using parallel donor systems.”

*The credit is provided on standard International Development Association (IDA) terms, with a commitment charge of 0.10 percent per annum and a service charge of 0.75 percent per annum (on the disbursed credit balance) over a 40 year period of maturity which includes a 10-year grace period.