Lesotho is a small, poor, and mountainous country of approximately two million people. There are many development challenges confronting Lesotho with half of the country's population living below the poverty line. Lesotho's income inequality is also among the highest in the world. Other obstacles to sustainable development include low quality of education and poor health services, widespread HIV/AIDS, and weak institutions. This Country Assistance Evaluation, prepared in collaboration with the African Development Bank Group, details Lesotho's political, economic, and social development. It analyses the country's development challenges and constraints.