This paper evaluates the 1988–90 structural adjustment program in Lesotho using a
computable general equilibrium model. It finds that the program failed to rectify a balance
of payments problem, and that without a massive inflow of capital for a water project the
country would be facing a major balance of payments crisis. Lesotho’s experience suggests
that structural adjustment need not work against the poor, and that the balance of payments
objective may be achieved by reducing recurrent government expenditures, other than
wages