MCC’s evidence-based approach to its investments begins with a mutual understanding of a country’s main growth challenges. During the first phase of the compact or threshold program development process, MCC and the selected partner country, jointly conduct a constraints-to-growth analysis (CA). This analysis identifies the constraints to private investment and entrepreneurship that are most binding to economic growth in the country. The results of this analysis enable the country, together with MCC, to select activities most likely to contribute to sustainable, poverty-reducing growth.

The Constraints Analysis Report for the Lesotho Health and Horticulture Compact highlights the following binding constraints to economic growth:

Poor Health Primarily Related to HIV/AIDS: The burden of disease for working age individuals in Lesotho is by far the highest in the world, and is primarily driven by HIV/AIDS. Lesotho’s rate of new HIV/AIDS infections is also the highest in the world, and the gap between the working-age burden of disease in Lesotho and that in neighboring Southern African countries has significantly increased over the past 10 years. This disease burden substantially reduces labor productivity, discourages investments in job-creating sectors, and imposes large direct costs on both the government and households in the form of health care expenditures and care for HIV/AIDS orphans and other dependents.
Ineffectiveness of Policy Planning, Coordination, and Execution: This constraint manifests in two distinct ways - (a) the absence of planning and coordination related to how effectively the government interacts with the private sector, and (b) inefficient public service delivery, public investment management, and public financial management (PFM).

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