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

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.