The objective of this study is to helpthe government to decide what role safety net and transferprograms should play in the coming 5 to 10 years. It seeksto answer following three questions: (i) can increasedspending on transfers accelerate poverty reduction in themedium to long term?; (ii) which groups and aspects ofpoverty will it make sense to target with transfers?; and(iii) which programs will have the greatest impact at anaffordable cost? This study examined such programs inLesotho both ones that currently exist, and the potentialscope for using instruments that may not currently exist. Italso widened its scope to examine all programs that transferpublic resources directly to households such as agriculturalsubsidies and university bursaries. It analyzed them throughthe lens of their impact on the poor because it is importantto evaluate public spending and trade-offs in the context ofwhere public funds are currently being spent and whatdistributional impact they are having. The assumptionunderlying this analysis throughout the report is that theover-riding objective of both the government and itsdevelopment partners is to reduce the high levels of povertyand inequality that persist in Lesotho. This report isorganized as follows: chapter one explores the countrycontext and fiscal space for public expenditure on socialsafety nets. Chapter two examines the dynamics of poverty inLesotho and the characteristics of the major vulnerablegroups and discusses which of these groups it will make mostsense for the social safety net to target. Chapter threeanalyzes Lesotho's existing transfer programs. Chapterfour reviews institutional and capacity issues. Chapter fivepresents options for a long-term package of social safetynets and associated costs, makes some recommendations forstrengthening existing programs, and suggests which type ofprograms it might be cost-effective to expand.
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