WORLD RANK: REGIONAL RANK: esotho’s economic freedom score is 53.5, making its economy the L 142nd freest in the 2021 Index. Its overall score has decreased by 1.0 142 31 point, primarily because of a decline in trade freedom. Lesotho is ranked 31st among 47 countries in the Sub-Saharan Africa region, and its overall ECONOMIC FREEDOM STATUS: MOSTLY UNFREE score is below the regional and world averages. Although the economy of Lesotho had been climbing higher in the mostly unfree category, it has suffered a setback this year. To expand economic freedom, the government will need to redouble its efforts to fight corruption and take other meaningful steps to improve the business and investment climates. Poor fiscal management is of particu- lar concern.
IMPACT OF COVID-19: As of December 1, 2020, 44 deaths had been attributed to the pandemic in Lesotho, and the economy was forecast to contract by 4.8 percent for the year.
ECONOMIC FREEDOM SCORE
53.5 ▼ DOWN 1.0 POINT
0 50 60 70 80 100 REGIONAL AVERAGE WORLD (SUB-SAHARAN AFRICA REGION) 55.7 61.6 AVERAGE
HISTORICAL INDEX SCORE CHANGE (SINCE 1996): +6.5
RECENT FREEDOM TREND QUICK FACTS
54.5 53.9 53.9 53.1 53.5 POPULATION: UNEMPLOYMENT: 2.1 million 23.4% GDP (PPP): INFLATION (CPI): $6.9 billion 5.2% 1.2% growth in 2019
5-year compound FDI INFLOW: $117.6 million annual growth 1.5% $2,882 per capita PUBLIC DEBT: 54.4% of GDP
2019 data unless otherwise noted. Data compiled as of September 2020
BACKGROUND: Landlocked within a mountainous area of South Africa, Basutoland was renamed the King- dom of Lesotho upon independence from the United Kingdom in 1966. It is a parliamentary constitutional monarchy, currently headed by King Letsie III. In 2020, Finance Minister Moeketsi Majoro replaced Prime Minister Thomas Thabane, who resigned after being implicated in the murder of his ex-wife. Lesotho’s narrow economic base consists of textile manufacturing, agriculture, diamond mining, remittances from Basothos working in South Africa, and regional customs revenue. About three-fourths of the population is engaged in animal herding and subsistence agriculture. A large dam and tunnel infrastructure project will divert water to South Africa and provide money and hydropower to Lesotho.
266 2021 Index of Economic Freedom WORLD AVERAGE | ONE-YEAR SCORE CHANGE IN PARENTHESES 12 ECONOMIC FREEDOMS | LESOTHO
RULE OF LAW GOVERNMENT SIZE
(–3.6) (+13.5) (+2.6) (–1.5) (–12.2) (+6.9)
41.6 60.5 32.2 71.5 22.2 67.2 Property Judicial Government Tax Government Fiscal Rights E ectiveness Integrity Burden Spending Health
Property rights are protected by law, but enforcement The top individual income tax rate is 35 percent, and the is inconsistent. Expropriation is unlikely. The judiciary is top corporate tax rate is 25 percent. The overall tax burden relatively independent but politicized, inefficient, slow, and equals 31.6 percent of total domestic income. Government chronically underfunded. Official corruption and impunity spending has amounted to 50.9 percent of total output remain problems in all sectors of government and public ser- (GDP) over the past three years, and budget deficits have vices. The management of state revenues is not transparent. averaged 4.1 percent of GDP. Public debt is equivalent to The anticorruption agency lacks full prosecutorial powers and 54.4 percent of GDP.
.faces capacity and funding challenges
REGULATORY EFFICIENCY OPEN MARKETS
(+2.5) (No change) (+0.1) (–20.0) (No change) (No change)
55.3 58.8 75.8 62.2 55.0 40.0 Business Labor Monetary Trade Investment Financial Freedom Freedom Freedom Freedom Freedom Freedom
Lesotho has made starting a business easier by removing the Lesotho has six preferential trade agreements in force. The requirement for a health certificate and the requirement for trade-weighted average tariff rate is 11.4 percent. Customs inspection of the premises for all businesses. The labor force procedures are gradually improving, but other nontariff participation rate rose in 2019. Monetary stability is affected barriers persist. Private-sector investment remains limited. by the South African rand, and the government maintains Facilitation of economic diversification is stymied by political food subsidies and influences other prices through state- considerations, and investment inflows remain constrained. owned enterprises. The high cost of credit hinders the development of a vibrant private sector.
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