…as Africa’s recovery stalls
Moroke Sekoboto
LESOTHO is facing growing economic headwinds as a new report by the World Bank Group warns that Sub-Saharan Africa’s recovery is beginning to stall, raising fresh concerns over inflation, debt pressures and job creation in the years ahead.
The World Bank’s April 2026 Africa Economic Update paints a sobering picture of a region struggling to sustain momentum after a decade of global shocks, with implications that are particularly significant for smaller, import-dependent economies like Lesotho.
This World Bank Group’s latest Africa Economic Update warns that the fragile economic recovery across Sub-Saharan Africa is beginning to lose momentum amid mounting global and domestic pressures.
The region is struggling to regain its footing after a decade marked by successive global shocks, including the COVID-19 pandemic, geopolitical tensions, and tightening financial conditions.
For Lesotho, a small and open economy deeply integrated into regional and global systems, these developments carry significant implications for growth, jobs, and household welfare.
“Sub-Saharan Africa’s economic recovery from successive global shocks is losing momentum, with growth projections for 2026 revised downward from those published in October 2025,” the report states.
Although economic growth across the region is projected to hold steady at 4.1 percent in 2026, the report cautions that this apparent stability masks rising risks that could quickly undermine progress. These risks are being driven largely by geopolitical developments, particularly the escalating conflict in the Middle East, which is disrupting global energy and commodity markets.
“Rising geopolitical spillovers from the Middle East, coupled with heavy debt-service burdens and deep-seated structural weaknesses, are eroding growth prospects and stalling job creation,” the report notes.
“For Lesotho, which relies heavily on imports of fuel and food, these global disruptions are expected to translate directly into higher prices at home.”
The report warns that rising costs of fuel, fertilizers, and food imports will increase inflationary pressures across the region, disproportionately affecting low-income households.
“Disruptions to domestic food production and elevated food import costs are likely to result in higher food prices,” the report says, adding that “these developments are expected to exacerbate inflationary pressures—especially in oil-importing countries.”
Inflation across Sub-Saharan Africa is projected to rise to 4.8 percent in 2026, reversing the downward trend observed in recent years. In Lesotho, where many households already spend a large share of their income on basic necessities, this could significantly erode purchasing power and deepen vulnerability.
At the same time, governments across the region are finding themselves with limited fiscal space to respond to these pressures. Rising public debt and increasing debt service obligations are constraining the ability of countries to invest in critical infrastructure and social services.
“High public debt and rising debt service costs continue to limit countries’ ability to fund development priorities and invest in foundational infrastructure needed to create more and better jobs,” the report states.
The scale of the challenge is underscored by the rapid increase in debt servicing costs across the region, with external public debt service as a share of revenue doubling from 9 percent in 2017 to 18 percent in 2025. For countries like Lesotho that depend on external financing and development assistance, these trends pose a serious threat to fiscal sustainability.
“Mounting interest payments exceed public spending on health or education in four out of five African countries,” the report warns.
Compounding these challenges is the risk to remittance flows, a crucial source of income for many Basotho households. Lesotho is identified in the report as one of the countries most dependent on remittances, which are vulnerable to global economic fluctuations.
“The conflict also poses risks to remittance flows, a critical source of income for many African households, particularly in highly remittance-dependent countries such as… Lesotho,” the report states.
A slowdown in global economic activity, especially in sectors such as construction and hospitality where many migrant workers are employed, could reduce remittance inflows and further strain household incomes.
Beyond these immediate pressures, the report highlights a deeper structural challenge facing the region: the urgent need to create jobs at scale for a rapidly growing population. With more than 620 million people expected to enter Africa’s labour force by 2050, current growth rates are insufficient to meet demand.
“Despite an improved outlook, growth in Sub-Saharan Africa remains too low to reduce poverty or create jobs at scale,” the report states.
In Lesotho, where youth unemployment remains high and formal job opportunities are limited, this challenge is particularly pronounced. Many workers are confined to low-productivity informal sectors, limiting income growth and economic mobility.
The report argues that addressing these challenges will require a fundamental shift towards more productive and diversified economic models driven by private sector growth. Central to this transformation is the effective use of industrial policy to promote sectors with high potential for job creation and value addition.
“The report argues that Africa’s growth challenge is structural, reflected in low investment, weak productivity, and limited job creation,” it states.
For Lesotho, this could mean building on existing strengths in manufacturing while expanding into new sectors that offer higher value and greater resilience. However, the report cautions that industrial policy must be carefully designed and implemented to avoid past failures.
“Well-designed industrial policies… can unlock scale economies, attract private investment, and reallocate firms and workers to higher-productivity activities,” the report notes.
At the same time, the report emphasises the importance of strengthening the broader economic ecosystem, including infrastructure, skills development, and access to finance. Without these foundational elements, industrial policy interventions are unlikely to succeed.
Regional integration also emerges as a key theme, with the African Continental Free Trade Area highlighted as a critical platform for expanding markets and enhancing competitiveness. For Lesotho, deeper integration into regional value chains could help overcome the limitations of its small domestic market and attract investment.
“Deepening regional integration… shifts entire categories of instruments from infeasible to viable,” the report says.
Andrew L. Dabalen, Chief Economist for the Africa Region at the World Bank, underscored the importance of protecting vulnerable populations while maintaining macroeconomic stability.
“In the short term, governments should target scarce resources to protect the most vulnerable households,” he said. “At the same time, maintaining macroeconomic stability… will be essential to navigate the current shock and position African countries for a faster recovery once the crisis subsides.”
As Lesotho navigates this increasingly complex economic landscape, the report makes clear that the path forward will require difficult choices and decisive action. While external shocks continue to shape the country’s economic outlook, the ability to implement sound policies, strengthen institutions, and invest in long-term growth drivers will ultimately determine its resilience.
“African countries often articulate strong industrial ambitions, but these may not translate into… jobs because delivery and monitoring systems are weak,” the report cautions.
For Lesotho, the message is clear: the challenges are significant, but so too are the opportunities—if the right policies are put in place and effectively executed.
