Lesotho: Economic Outline
For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.
Lesotho's economy has stagnated since 2016, and contracted by an estimated 10% (IMF). Structural bottlenecks, a weak regional environment, climate shocks, and since 2020 the outbreak of the Covid-19 pandemic, contributed to this prolonged recession (IMF). After contracting by -5.4% in 2020, GDP growth rebounded to 2.8% in 2021, according to IMF estimates. Growth remains largely dependent on South Africa's post-pandemic economic recovery and uneven foreign investment in infrastructure mega-projects (IMF). The IMF forecasts economic growth to remain subdued at 1.6% in 2022 and 2023. According to The Economist Intelligence Unit, increased agricultural output and strong global demand for diamonds will spur growth in 2023.
Lesotho's economy was already facing challenges when it was further hit by the Covid-19 pandemic in 2020, which continued to drag on activity through 2021. The economy also suffered from a decline in revenues from the Southern African Customs Union (SACU). Public finances deteriorated further due to increased expenditures related to support measures and shrinking revenues. After reaching -9% GDP in FY 2020/2021, fiscal deficit narrowed to -6.5% GDP in 2021/2022 (instead of widening to -13% GDP based on initial projections) due to lower expenditures (Agence France Trésor). It is expected to increase to -7.7% GDP in 2022/2023, before reducing to 1.4% GDP in 2024/2025 following the government’s fiscal consolidation plan (Agence France Trésor). Public debt slightly decreased from 50.4% GDP in 2020 to 50% GDP in 2021, and is expected to slightly increase to 50.2% GDP in 2022 and 50.8% GDP in 2023 (IMF). Considered sustainable by the IMF, it should remain below the SADC convergence criterion of 60% GDP. The public debt is mostly external and concessional, and relies on international lenders. Despite subdued demand, the decline in imports from South Africa contributed to food shortages in Lesotho, fuelling inflationary pressures (AfDB). Inflation increased from 5% in 2020 to 5.8% in 2021, and it was expected to decline slowly to 5.3% in 2022 and 5% in 2023 (IMF). However, the war in Ukraine has raised commodity prices, and could cause further price hikes. In addition to supporting post-pandemic economic recovery, fiscal consolidation and structural reforms to restore external balance, preserve debt sustainability, and stimulate inclusive growth remain the main priorities (IMF). The authorities have requested financial support from the IMF.
Poverty and strong inequalities plague Lesotho’s social environment. Indeed, according to the World Bank, unemployment rate amounted to 24.6% in 2020 and according to national poverty lines, almost half of the population lives in poverty. In terms of human development, the country is ranked 165th out of 189 countries in the Human Development Index published by UNDP.
| Main Indicators | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| GDP (billions USD) | 2.06 | 2.47 | 2.51 | 2.58 | 2.70 |
| GDP (Constant Prices, Annual % Change) | -6.0 | 2.1 | 2.1 | 1.6 | 2.1 |
| GDP per Capita (USD) | 999 | 1,181 | 1,187 | 1,208 | 1,248 |
| General Government Gross Debt (in % of GDP) | 54.2 | 53.5 | 50.7 | 48.0 | 45.4 |
| Inflation Rate (%) | 5.0 | 6.0 | 8.1 | 6.2 | 5.5 |
| Current Account (billions USD) | -0.03 | -0.12 | -0.21 | -0.23 | -0.27 |
| Current Account (in % of GDP) | -1.6 | -5.0 | -8.5 | -8.7 | -9.9 |
Source: IMF – World Economic Outlook Database - October 2021.
Note: (e) Estimated Data
| Monetary Indicators | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|
| Lesotho Loti (LSL) - Average Annual Exchange Rate For 1 GBP | 19.86 | 17.16 | 17.67 | 18.13 | 21.12 |
Source: World Bank - Latest available data.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 44.3 | 13.3 | 42.4 |
| Value Added (in % of GDP) | 4.9 | 34.2 | 49.2 |
| Value Added (Annual % Change) | 2.1 | 8.5 | -2.2 |
Source: World Bank - Latest available data.
| 2018 | 2019 | 2020 | |
|---|---|---|---|
| Labour Force | 962,776 | 974,540 | 967,513 |
Source: International Labour Organization, ILOSTAT database
| 2017 | 2018 | 2019 | |
|---|---|---|---|
| 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
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.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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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.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
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.).
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Latest Update: February 2023
