Lesotho - Supplemental Financing of the Lesotho Tax Modernization Project (LTMP)


Project Summary

Approval Date 30 Jun 2021
Signature Date 21 Jul 2021
Planned Completion Date 31 Dec 2023
Sovereign / Non-Sovereign Sovereign
Sector Multi-Sector
DAC Sector Code 15124
Commitment U.A 3,000,000
Status Implementation

Project General Description

The proposed intervention is an ADF Loan of UA 3 million to the Kingdom of Lesotho for the supplementary financing to the Lesotho Tax Modernisation Project (LTMP) approved in 2017 for an original estimated cost of UA 5.0 million. The Project is aligned to (a) Lesotho’s long-term development agenda as laid out in the National Strategic Development Plan II (NSDP II, 2018/19-2022/23), which places renewed emphasis on addressing the challenges of unemployment and poverty through promoting an inclusive and sustainable economic growth. The LTMP activities are advancing well with several contracts having been signed. Notwithstanding the progress, the Project is faced with a financing gap due to cost overrun. Some activities, especially e-taxation, VAT compliance solution, and data analytic capacity were under budgeted and during project implementation, the actual costs for the such activities (both for goods and consulting services) have been determined. The supplementary financing proposal seeks to enhance the realization of the Project development objective. These additional resources are provided to finance existing shortfalls under e-Taxation and VAT compliance which are the backbone of the project. The Project components remain the same as approved under the on-going LMTP and are as follows: (i) Enhancing tax modernization, (ii) Institutional strengthening, and (iii) Project Management Support. It is anticipated that all the activities will be completed by 30th June 2023.

Project Objectives

The overarching development objective of the Project is to promote economic growth and poverty reduction by improving effectiveness of tax administration to create fiscal space (i.e. increased tax revenues) to finance the country’s development plan. The specific objective is to strengthen tax administration capacity by expanding the tax base, modernizing collection and compliance procedures, amending, and consolidating the legal framework, and strengthening the institutional framework.

Beneficiaries

The direct project beneficiaries are the Lesotho Revenue Authority (LRA), and the Ministry of Finance through institutional capacity building support and technical assistance to improve revenue collection capacity. The indirect beneficiaries are the private sector (taxpayers) through a simplified tax regime and streamlined tax procedures for small business taxpayers. To the extent that the increased tax revenues are channelled to social and economic expenditure that will directly benefits the poor segments of the society.

Participating Organization

Funding
African Development Fund
Implementing
MINISTRY OF FINANCE

Information

IATI identifier 46002-P-LS-KF0-004
Last Update 01 Dec 2021

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Contact Details

Name KOMA Baboucarr
Email b.koma@afdb.org

Geographic Location

Country Lesotho