Lesotho is a small, mountainous, and land-locked country, surrounded by its much larger neighbor, South Africa. It has a population of about two million, and a per capita gross domestic product (GDP) of $1,160. Lesotho is classified as a lower-middle-income country. It is mostly highlands, with its lowest point 1,400m above sea level. Previously a British protectorate, the nation gained its independence in October 1966. Lesotho is a constitutional monarchy, ruled by a King as head of state, and governed by a 33-member Senate and a 120-member National Assembly. Lesotho held elections in June 2017 for the third time in five years. This led to the formation of a four-party, coalition government, led by Prime Minister Thomas Thabane. In keeping with recommendations for key governance and security reforms, made both by the Commonwealth and the Southern African Development Community (SADC), Lesotho’s leadership has committed itself to engaging in multi-stakeholder consultations to inform the reforms.
Economic growth in Lesotho for the last three years averaged approximately 3%, driven primarily by textile manufacturing and agriculture. The performance of textile manufacturing was underpinned by the Rand/dollar depreciation, while agriculture experienced a strong recovery following the severe droughts of 2015 and 2016. Domestic growth is, however, expected to pick up in the next three years boosted by an increase in construction associated with the second phase of the Lesotho Highland Water Project and diamond mining. Unemployment remains high at 24 to 28%, coupled with high inequality and poverty. Lesotho made progress in poverty reduction in the 2000s by lowering its headcount poverty rate ($1.9/day PPP) from 61.3% in CY02 to 59.7% in CY11. Estimates for 2016 suggest that 57.8% of the population is still trapped
The country finds itself at a crossroads needing new engines for growth, a more streamlined role for the state, and a dynamic private sector to help it seize opportunities in regional and global markets. Lesotho has made important progress in improving its Doing Business indicators, especially in terms of streamlining business and property registration processes that hinder the growth of local businesses, as well as in incoming Foreign Direct Investment (FDI). However, more progress is needed to improve the business environment and achieve the country’s development goals. The decline in South African Customs Union (SACU) revenues pose a challenge to the country's fiscal outlook: revenues fell from 25% of GDP in 2014/15 to 13.6% of GDP in 2016/17. The government responded to the SACU shortfall by allowing the fiscal deficit to increase. As a result, Lesotho’s deficit reached 7% of GDP in FY2016/17. SACU revenues recovered in 2017/18 but are projected to decline by 2½ percentage points of GDP a year for the next two years. With public spending at 50% of GDP in
Lesotho’s greatest health challenge remains
Last Updated: Apr 19, 2018