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Lesotho Lesotho 74 – Lesotho Lesotho 2006 At a Glance Population (mn) 1.8 Population Growth (annual %) -0.2 Official Language (s) English/Sesotho Currency Loti (LSL) GDP (Current US$ bn) 1.4 GDP Growth (annual %) 1.6 GDP Per Capita (US$) 806 FDI, net inflows (US$ mn) (2005) 47 External Debt (US$ mn) 700 External Debt/GDP (%) 46.6 CPI Inflation (annual %) 4.5 Exports of goods and services (% of GDP) 41.8 Sovereign Ratings Gross Official Reserves (US$ bn) 0.591 Long Local Foreign Term Currency Currency Gross Official Reserves (in month of imports) 5.3 UNDP HDI RANKing 149 Fitch BB+ BB– Source: AfDB, IMF, UNCTAD, UNDP, UN Population Division 1. Overview of Financial System on treasury bills have moved downward, influenced The Central Bank of Lesotho, (CBL), known until 1982 by the fall in the government borrowing requirement, as the Lesotho Monetary Authority, is charged with and interest rate spreads relative to South Africa have the principal objective to achieve and maintain price narrowed. stability in the financial system. Lesotho is a member Lesotho’s debt indicators have improved markedly. of the Common Monetary Area (CMA) through a With the strengthening of its fiscal position, the trilateral Agreement between South Africa, Swaziland Government reduced the stock of outstanding L and recently Namibia. The CMA replaced the Rand treasury bills from 17% of GDP in 2002/03 to 8% Monetary Area in 1986, accommodating changes in in 2005. Lesotho’s external public debt as a share of the position of Swaziland. While South Africa GDP has also been steadily declining. effectively formulates the monetary policy for the entire region, each member has its own central bank, Bank and Non-Bank Financial Sector is responsible for its own monetary policy, and controls The commercial banking sector is dominated by its financial institutions. However, management Lesotho Bank and the South African-owned Standard of the Rand currency and the gold and foreign Bank (which acquired Barclays Bank’s interests in exchange reserves of the Rand area remains the sole Lesotho). The Lesotho Building Finance Corporation responsibility of South Africa. The Central Bank of merged with Lesotho Bank in April 1993 to facilitate Lesotho Act of 2000 conferred a considerable degree an increased scale of domestic mortgage lending. The of autonomy to the CBL. Monetary developments have CBL regulates all financial institutions in the nation; reflected those in South Africa. The discount rate has it established the Financial Institutions Supervision remained steady since August 2004, market yields Technical Committee (FISTC), comprising of the Lesotho – 75 governor and other senior management, in order to has the right to issue its own currency which serves as develop and consistently review its programme to legal tender in the issuing country only. establish an efficient financial system. Under the CMA agreement, the LSL is pegged at Capital Markets par to the South African Rand. There are no exchange The CMA agreement provides Lesotho’s banking controls between members of the CMA. Exchange institutions with access to the South African capital controls for external transactions are similar to those in market. Public and private sector institutions of the Republic of South Africa. However, these controls Lesotho, which are subject to relevant financial and regulations are implemented by the CBL. laws and policies applicable to counterparts, have LSL Per Unit of USD ( Year End) the full right to access the South African capital market. There is no stock exchange in Lesotho, as 15 companies are able to list on the Johannesburg 10 Stock Exchange. There is also no formal debt market for the issuance of treasury bonds, as 5 the Government only issues treasury bills for its 2001 2002 2003 2004 2005 2006 monetary operations. Source: Bloomberg 2. Fixed Income Markets Government Securities 4. Participation of Foreign In 1992, the Central Bank of Lesotho introduced an Investors and Issuers English Auction System (EAS) for issuance of treasury There is no participation of foreign investors in bills to the public. A monthly auction was introduced government treasury offerings. in 2001 to drain excess liquidity from the highly liquid banking sector. It is aimed at encouraging local banks 5. Investment Taxation to invest their excess reserves in the country to build Dividends payable to non-resident shareholders are up foreign reserves. The Dutch Auction System is subject to a withholding tax of 25% and are charged currently being proposed as a replacement of the to the non-resident shareholders. EAS as it was often difficult for first-time investors to relate the price of the security to the rate of interest 6. Key Contacts that would accrue on their investment (i.e. purchasing • Central Bank of Lesotho at a discount). Market-determined interest rates on Mailing Address: P.O. Box 1184, treasury bills are set at a level slightly higher than MASERU 100, Kingdom of Lesotho similar instruments in South Africa. The CBL strives Other Address: Corner Airport and Moshoeshoe to educate and sensitise the general public about its Roads, Maseru Central, Lesotho operations in the capital markets. Tel: +266)-22314281/22324281 Fax: +266-22310051/22310679 3. Foreign Exchange E-mail: [email protected] In 1980, the Lesotho Monetary Authority (now the Web: www.centralbank.org.ls Central Bank of Lesotho) began issuing the Loti (LSL) as the national currency. The South African Rand serves as legal tender in all countries of the Common Monetary Area (CMA), except for Swaziland. Each member state .
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