Lesotho 

Lesotho country policy

Policy established 07 December 2011

• ILC, bank guarantee or central public guarantee (unconditional)
• The country ceiling is 1000 mln euro
• Early warning signal 50 mln euro
• Public buyers: ORIO facility

Country class: 5

Lesotho country facts

Atradius Dutch State Business  Economic Research
Country Report last updated :  24 August 2011
Country :  LESOTHO

Political Situation
Fairly Stable

Head of state
King Letsie III (since February 1996).

Form of government
Lesotho Congress for Democracy (LCD) forms the government, Prime Minister is Pakalitha Mosisili.
 
Member of
UN, IMF, IBRD, OAU, SADC, SACU, CMA, WTO and the Commonwealth.

Internal Economic Situation
Moderate Recovery

General situation
Lesotho has little potential for agriculture or tourism. Main sectors in the economy are textile industry, water, diamond mining and remittances from Lesotho miners in SA. Also  SACU receipts are traditionally a significant source of income. The reduction of SACU receipts is a threat for the current account and the government budget. Reforms are therefore necessary. Lesotho has been able to build a successful textiles industry thanks to the AGOA preferential trade agreement with the US, however the sector is struggling to compete with Asian producers. Lesotho’s currency (loti) is pegged 1:1 to the rand, which is also legal tender.
As a member of CMA (special monetary arrangement with SA, Swaziland & Namibia) monetary stability and access to forex is guaranteed, although inflation is rather high at 7.2% (like SA). Lesotho’s economy recovered after a slowdown in 2009, however real growth figures in 2010 and 2011 are not impressive (3 to 3.5%).
Lesotho’s business environment is poor compared to other SACU countries.    
 
External Economic Situation
Large Current Account Deficit

Main sources of foreign exchange
Garments (73%), diamonds (21%), water, remittances and SACU import tariffs pool.

Main foreign markets
South African Customs Union (19% of exports), USA (60%) and Belgium (17%).

Main expenses of foreign exchange
Capital goods (32% of imports), food (28%) and fuel and energy (18%).
 

Balance of payments 
Reduction of SACU receipt have significant impact on current account