Economic Outline

flag Lesotho Lesotho: Economic Outline

Economic Indicators

Since 2010, Lesotho’s growth rate has averaged only 1.2%, highlighting the unsustainability of the consumption-driven growth model reliant on a sizable public sector. In 2023, the economy saw growth of approximately 2%, largely propelled by the public sector, notably the Lesotho Highlands Water Project (LHWP-II) megaproject, which positively influenced transportation, logistics, and financial services. However, strikes caused delays in early 2024, although activities have resumed since then. Nevertheless, inefficiencies in public investment management and spending control are postponing the execution of capital projects. On the industrial front, there was growth of around 5%, while agricultural expansion, though still positive, slowed notably. The forecast suggests that growth will continue at a subdued pace, expected to hover around 2-2.5% over the next three years. This rate falls short of bringing the economy back to its pre-pandemic level by 2026 and making substantial strides in reducing poverty and inequality rates (World Bank).

Lesotho's economy was already facing challenges when it was further hit by the Covid-19 pandemic, declining revenues from the Southern African Customs Union (SACU), the spillovers from the war in Ukraine, and major flooding. Despite previous challenges, the fiscal balance saw a remarkable improvement in 2023, as it shifted from a 4.3% GDP deficit in 2022 to a 5.5% surplus, largely due to a significant increase in SACU revenue. In the fiscal year 2023/24, the government allocated more than half of the SACU windfall to bolster public investment and recurrent spending, each by 2% of GDP. These spending increments primarily targeted transfers to other public sector entities, social benefits, and subsidies. In the same year, the IMF estimated the debt-to-GDP ratio at 61.3%. Following the substantial fiscal surplus recorded in 2023, the government is anticipated to revert to deficits, despite the continued high levels of SACU transfers. This situation poses a risk to macroeconomic stability. Headline inflation dipped from 9.8% peak to 7.2% by December 2023, driven by lower fuel and food costs, but new pressures arise. Expected to ease to 5.0% with decreasing energy and food prices, but staying relatively elevated due to rand depreciation (data World Bank). Fiscal policy flaws and management inefficiencies impede public spending. Dominance of the public sector stifles private sector engagement, curbing investment and new ventures. Entrepreneurs face credit access hurdles, while regulatory gaps raise costs and uncertainty, hindering competition and investment, including foreign direct investment. Significant infrastructure gaps, particularly in technology, discourage private investment and hamper global value chain integration.

Poverty and strong inequalities plague Lesotho’s social environment: in 2022, over one-third of the population was estimated to live on less than USD 2.15 per day (2017 PPP), and the Kingdom ranks among the top quintile of countries with the most unequal income distribution. According to the World Bank, the unemployment rate stood at 16.3% in 2023 (from 16.7% one year earlier). The GDP per capita (PPP) was estimated at only USD 2,646 in 2022.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 2.462.372.522.652.77
GDP (Constant Prices, Annual % Change) 2.12.12.32.52.1
GDP per Capita (USD) 1,1661,1101,1671,2121,248
General Government Gross Debt (in % of GDP) 59.961.360.460.360.7
Inflation Rate (%) n/a6.95.65.05.0
Current Account (billions USD) -0.20-0.07-0.12-0.24-0.21
Current Account (in % of GDP) -7.9-3.1-4.7-9.0-7.4

Source: IMF – World Economic Outlook Database - October 2021.

Note: (e) Estimated Data


 
Monetary Indicators 20162017201820192020
Lesotho Loti (LSL) - Average Annual Exchange Rate For 1 MUR 0.410.390.390.410.42

Source: World Bank - Latest available data.

 

Main Sectors of Industry

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 30.0 34.9 35.1
Value Added (in % of GDP) 3.5 24.9 49.6
Value Added (Annual % Change) -25.6 3.5 0.8

Source: World Bank - Latest available data.

 

The Active Population in Figures

201820192020
Labour Force 962,776974,540967,513

Source: International Labour Organization, ILOSTAT database

 
201720182019
Total activity rate 69.75%69.82%69.87%
Men activity rate 76.80%76.75%76.67%
Women activity rate 62.74%62.91%63.08%

Source: International Labour Organization, ILOSTAT database

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
53,5/100
World Rank:
142
Regional Rank:
31

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Partly Free
Political Freedom:
3/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
88/180

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Sources of General Economic Information

Useful Resources
Ministry of Finance
Ministry of Natural Resources
Ministry of Mining
Central Bank
 
 

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Latest Update: May 2024