Economic Overview


The period begining in the 1990s marked an economic transition in Lesotho.  Once based on subsistence agriculture and animal husbandry, as well as migrant workers' remittances from the South African mines, the economy has changed substantially as a result of growth in the manufacturing sector.  In the 1980's nearly half of Lesotho's GNP was based on earnings of some 120 000 mine labourers, today less than half that number is employed.

By contrast, tremendous growth in the manufacturing and textile sectors led to the creation of over 50,000 jobs.  The Lesotho Highlands Water Project led to a boom in the construction sector and there are promising developments and increasing investments being made in the mining sector. The construction of the Metolong Dam is expected to give a further boost to the construction sector, in addition to providing water to six lowland districts, including Maseru.

With the assistance of development partners, many new roads have been built to increase accessibility of the highlands, and major reforms in government are expected to improve financial management and the quality of public accounts.  In the social sectors, the government has been able to make substantial improvements in service to its citizens, including the establishment of an old age pension and free primary education.  Not least it has been a time of stability and democracy.


Lesotho is susceptible and vulnerable to outside economic global trends. In particular, the fortunes of the US economy are particularly meaningful for Lesotho as the country is the largest textile exporter to the US from Sub-saharan Africa. Economic developments in Europe also have a direct effect on Lesotho's economy as South Africa's is Europe`s main trading partner, and shocks to that economy can easily be transmitted to Lesotho, since the two countries are closely linked economically. Thus the recent global economic crisis had negative effects on the economy of Lesotho. This resulted in a decline in Goverment revenue particularly external trade related revenue. It affected the domestic manufacturing subsector adversely as the demand for Lesotho textile exports declined leading to several firms ceasing operations and hence employment reached its lowest level since 2005. The demand for Lesotho`s diamonds also declined. Migrant workers` remittances also fell as more Basotho were retrenched. In this regard the ongoing global recovery will augur well for Lesotho.    


Central Bank of Lesotho