AfDB approves $209m strategy to boost diversification, private sector growth in Lesotho

The African Development Bank Group (AfDB) has approved a new $209 million Country Strategy Paper (CSP) for Lesotho, setting out a five-year roadmap to accelerate the country’s economic diversification, resilience and inclusive growth, a statement from the bank said on Wednesday.

The decision comes at a critical period for the landlocked southern African nation, which is grappling with multiple economic headwinds, including a 15 percent U.S. tariff on apparel exports, the loss of a $300 million Millennium Challenge Corporation compact, and dependence on regional economic performance. Nearly half of Lesotho’s population still lives in poverty, with youth unemployment hovering around 39 percent.

AfDB’s Deputy Director General for Southern Africa and Country Manager for Lesotho, Moono Mupotola, described the new framework as a turning point:

“Lesotho stands at a critical juncture. 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 plan focuses on two main pillars: building sustainable infrastructure to drive industrialisation and strengthening institutional and human capacities to boost competitiveness. Targets include achieving universal electricity access by 2030 through the Mission 300 programme, cutting broadband costs to support a thriving tech start-up ecosystem, and expanding safe drinking water access.

The Bank also intends to expand water and agricultural infrastructure, modernise tax collection, and strengthen civil service capacity through new training programmes. Support for the private sector will include entrepreneurship initiatives, funding for women- and youth-led businesses, and digital skills training for 20,000 young people, 40 percent of them women.

Given Lesotho’s exposure to climate shocks, the strategy incorporates measures to scale up climate-smart agriculture, improve disaster risk management, and promote renewable energy and water investments. These initiatives are expected to also address pressing social issues such as reducing child stunting, which currently affects more than one-third of children under five.

The strategy places strong emphasis on regional integration, backing cross-border infrastructure links with South Africa, trade facilitation under the African Continental Free Trade Area (AfCFTA), and participation in regional agro-processing value chains.

The CSP aligns with Lesotho’s National Strategic Development Plan II (2018–2028), the AfDB’s Ten-Year Strategy (2024–2033), the AU’s Agenda 2063, and the UN Sustainable Development Goals. Financing will draw on several AfDB windows, including the African Development Fund, the Regional Operations Window, and the Climate Action Window, in collaboration with other development partners.