Chapter four: Economic governance and management 96 335. In addition to its inadequate infrastructure, the absence of links between the manufacturing sector and the rest of the economy almost makes Lesotho a closed economy. All the inputs are imported and expatriates hold all technical and supervisory positions, as skills in these areas are in short supply. FDI has not led to technology being transferred or knowledge being broadened. This is shown by the absence of Basotho-owned firms, even though Lesotho has housed the garment industry for 25 years. Small and medium enterprises (SMEs) face constraints related to the weakness of the economy, the absence of property laws, rules governing finance and red tape. 336. Despite these difficulties and challenges, economic performance in Lesotho has improved since the turn of the 21st Century (see table 4.1). Real GDP grew by an annual average of 3.8 per cent between 2002 and 2008. The Ministry of Finance and Development Planning (MoFDP) predicts that real GDP will grow by 3.6 per cent in 2009, by 4.3 per cent in 2010, and by 5.0 per cent in 2011. The rate of inflation averaged 7.5 per cent annually between 2002 and 2008, while per capita income averaged $715 annually. Overall fiscal balance, as a percentage of GDP, averaged 6.3 per cent including grants, and 4.8 per cent excluding grants. The ratio of external debt to GDP was 51 per cent during this period. Financial intermediation, measured as the ratio of broad money (M2) to GDP, averaged 0.51 per cent, indicating low and shallow finance. Public administration, with an annual average of 38.5 per cent during the period under review, enjoyed a large share of government expenditure, while the economic sectors absorbed only 22 per cent. The social sectors had an annual average of almost 40 per cent. 337. The government has developed a growth strategy for 2008/2009 to 2010/2011 in order to sustain and improve on this performance. The strategy contains a set of development plans and policies aimed at achieving sustainable development in the long term. The priority of the strategy is to accelerate shared and sustainable economic growth in order to address vulnerability at the macro and household levels. The Medium-Term Expenditure Framework (MTEF) is based on the growth and poverty reduction strategies of the country and is aligned to a new budgeting process. This makes the growth strategy a framework, with annually revised and selected priority actions, that line ministries with growth portfolios should use when preparing their budget framework papers and budget submissions. When combined with earlier initiatives, like the national Vision 2020 and the Poverty Reduction Strategy (PRS), it forms the policy framework of the government for accelerating growth and reducing poverty. 338. The role of the government in the strategy is twofold. The first is to facilitate private sector initiatives. It will carry this out by creating a conducive and enabling environment for the private sector by establishing a sound legal and institutional framework. The second is to provide public and social goods that, because of market failures, are not provided by the private sector.