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This morning there was a bit of a mempool congestion on Litecoin which led to a number of exchanges shutting down their Litecoin withdrawals as their transactions dropped from the mempool when it filled up to the default size of 5MB. What is the reason for the default mempool size to be so small in Litecoin?

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To save memory. Back in time LTC was not getting too much transactions for block, there was no reason to eat more mem. I guess this way people could run LTC node on embedded devices. But that was fixed in February and since 0.15.1 default mempool size in Litecoin is 300Mb.

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