Lesotho, with a population of 2.3 million, is geographically surrounded by and economically integrated with South Africa from which it receives approximately 85 percent of its imports for final consumption. The World Bank classifies Lesotho as a lower-middle income country. In 2024, Lesotho registered a Gross Domestic Product (GDP) per capita of $1,106. Approximately 49.7 percent of the population live below the poverty line and the unemployment rate is estimated at 30.1 percent. Inflation dropped from an average of 8.7 percent in 2022 to 4.0 percent in April 2025. Lesotho is one of the most unequal countries with a Gini coefficient of 0.541. The government is the main player in the national economy as it is the largest employer. While Lesotho is open to foreign investment, there are some restrictions on foreign businesses, and the private sector is still in development. Lesotho enjoys ready access to the South African market. The country follows World Trade Organization (WTO) laws and regulations in terms of free trade. Lesotho is a member of regional economic blocks including the Southern African Customs Union (SACU), and as such, does not pay tariffs to export goods to other SACU members (Botswana, Namibia, South Africa, and Eswatini). Except for Botswana, these countries also form a common currency and exchange control area known as the Common Monetary Area (CMA).
Within Lesotho, the South African rand can be used interchangeably with Lesotho’s currency, the loti since it is pegged one to one (1:1) to the South African rand. The loti-rand peg provides some level of economic stability, and the government has a record of pursuing prudent macroeconomic policies. Lesotho gets most of its foreign exchange through SACU earnings, water exports to South Africa, and, to a lesser extent, remittances from migrant laborers employed in South Africa. The economy is mostly export driven as international trade makes up a large percentage of GDP. Lesotho is also a member of the Southern African Development Community (SADC) and joined the African Continental Free Trade Area in November 2020. The major economic sectors are manufacturing, mining, agriculture, energy, and services. Major export products are garments, diamonds, water, wool, and mohair. The 2023 SADC Investment Climate Score Card scored Lesotho at 0.40 in terms of restrictions in doing business scoring above the regional score of 0.20 and the global average of 0.10. The Global Sustainable Competitiveness Index 2024 ranked Lesotho at 42.90, placing it in the 131st position out of 137 countries. The 2024 score is an improvement from the previous year’s 42.32, and the highest score Lesotho has ever achieved.
Political Environment
Visit the State Department’s website for background on the country’s political and economic environment.”
For further information, please visit: https://www.state.gov.countries-areas/Lesotho/