Executive summary 8 4.23 In order to develop an institutional framework conducive to accelerated growth and improved service delivery, Lesotho has promulgated the Local Government Act and regulations and conducted local council elections in 2005. However, local government structures remain highly dependent on the central government. They have consolidated budgets and development plans and government has not yet harmonised laws and regulations to enable them to undertake their revenue-collection functions. 4.24 Although Lesotho has adopted many policies and institutional reforms in order to improve the transparency, predictability and credibility of economic policies, significant implementation gaps persist. Such gaps are noticeable in service delivery and budget implementation. Human and institutional capacity limitations are largely responsible for these gaps. The budget-preparation process is an exclusive prerogative of the government. Stakeholder participation takes place only after ratification of the process by Parliament. 4.25 Lesotho has enacted several institutional reforms to improve public sector management. Public finance management and accountability often fail to adhere to institutional requirements. Ministries are often unable to submit timely accounts for auditing and there are concerns regarding the lack of political will on the part of Parliament and the government to compel them to meet their legal obligations. 4.26 Similarly, the country has adopted numerous acts and statutes and has set up institutions such as the Public Accounts Committee (PAC), the DCEO and the Office of the Auditor General (OAG) to combat corruption and money laundering. But, the biggest challenges lie in the slow implementation of these acts. There are serious institutional challenges regarding the fight against corruption, including weak enforcement, a shortage of staff and the limited resources of anticorruption bodies. Indeed, inadequate human capacity appears to be a factor that constrains efficiency across these bodies. 4.27 While Lesotho’s current institutional integration arrangements limit the scope for an independent economic policy, they confer significant benefits on Lesotho. The arrangements facilitate trade, investment and cross-border activities such as tourism. In addition to the annual receipt of more than 50 per cent of its public revenue from the SACU pool, Lesotho receives between 40 and 60 million rand per annum in compensation for the rand circulating in the country. 4.28 The regional integration arrangement is undoubtedly the most optimal for Lesotho in the light of its size and its geographical location inside South Africa. The challenge to Lesotho is to design and implement appropriate policy to enable it to participate more meaningfully in economic integration arrangements and to widen its market base. In addition to pursuing preferential trade arrangements, finding a niche and increasing competition are the key to progress in this regard. 4.29 The APR Panel recommends that Lesotho improve on the collection and compilation of timely and consistent data that conforms to international standards. The country should also continue its efforts in such areas as: policy formulation and implementation; domestic resource mobilisation and the better utilisation of revenue; improving the investment environment in order to attract domestic and foreign investment; building capacity for improved public sector management; implementing decentralisation; strengthening institutions to combat corruption and money laundering; and