Lesotho Faces Economic Strain as MCA Compact II Ends, Impacting Health, Agriculture, and Small Businesses

Local economist Mr. Lefu Mokaoane has warned that Lesotho faces a potential socio-economic downturn following the closure of the Millennium Challenge Account (MCA) Compact II. The development fund, which supported health, horticulture, and business initiatives, was halted after a U.S. executive order in January 2025 paused all foreign assistance programs. Lesotho received final notice of termination on November 19, 2025, with official closure scheduled for April 18, 2026.

Mr. Mokaoane described the loss of the MCA Compact II funds as a major economic blow, highlighting its impact on investment, employment, and livelihoods. Small contractors engaged in the projects are expected to lose job opportunities, while the long-term benefits of horticulture and health projects will be compromised. He noted that the horticulture initiative, aimed at strengthening food security, will face challenges in maintaining stable production levels, potentially affecting national food availability.

In the health sector, the Compact supported primary health care infrastructure. Mr. Mokaoane warned that the closure could disrupt access to essential services, leading to potential declines in overall health outcomes. Similarly, the business development programs targeting women and youth are likely to face setbacks, reducing opportunities for economic empowerment and entrepreneurship.

Although the government has committed to sustaining the initiatives, Mr. Mokaoane cautioned that it will be difficult to match the scale of MCA funding. Alternative funding through taxes or loans may have negative consequences. Increasing taxes could divert resources from other projects, while additional borrowing would raise national debt, undermining economic stability.

Deputy Prime Minister Justice Nthomeng Majara highlighted that the government has worked with MCA-Lesotho Compact II to restructure the projects for continuity. She confirmed that improving health outcomes, supporting small business growth, and enhancing agricultural productivity remain national priorities. Majara emphasized transparency throughout the transition and urged citizens to be patient as the government takes over funding and implementation.

MCA Compact II represented a substantial investment in Lesotho, with the U.S. committing approximately $300 million (M4,963,647,000.00) and the government of Lesotho contributing over $22 million (M364,000,780.00). The program, launched in March 2024, was designed to support health, irrigation, horticulture, and small business development over five years. Its closure leaves a critical funding gap, and economists warn that immediate measures will be necessary to mitigate potential socio-economic disruptions.