2016 Index of Economic Freedom

Lesotho

overall score50.6
world rank152
Rule of Law

Property Rights30.0

Freedom From Corruption49.0

Limited Government

Government Spending0.0

Fiscal Freedom59.1

Regulatory Efficiency

Business Freedom53.3

Labor Freedom62.1

Monetary Freedom76.9

Open Markets

Trade Freedom85.8

Investment Freedom50.0

Financial Freedom40.0

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Quick Facts
  • Population:
    • 1.9 million
  • GDP (PPP):
    • $5.3 billion
    • 2.2% growth
    • 4.5% 5-year compound annual growth
    • $2,764 per capita
  • Unemployment:
    • 26.2%
  • Inflation (CPI):
    • 3.9%
  • FDI Inflow:
    • $46.4 million
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Institutional shortcomings and the lack of much-needed economic reform continue to undermine Lesotho’s entrepreneurial growth. Recent fiscal reforms have been limited in scope and depth. Impeded by political volatility and pervasive corruption, the protection of property rights and enforcement of the rule of law remain weak.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 50.6 (up 1.0 point)
  • Economic Freedom Status: Mostly Unfree
  • Global Ranking: 152nd
  • Regional Ranking: 38th in Sub-Saharan Africa
  • Notable Successes: Monetary Freedom
  • Concerns: Management of Public Finance and Rule of Law
  • Overall Score Change Since 2012: +4

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Background

Lesotho is a parliamentary constitutional monarchy, and King Letsie III is ceremonial head of state. Thomas Thabane, elected prime minister in May 2012, fled in August 2014 after an attempted coup. He returned four days later following a deal brokered by the South African government and fled again, along with other opposition leaders, in May 2015. General elections held in February 2015 were largely viewed as free and fair, and Pakalitha Mosisili is now prime minister in a coalition government. Geographically surrounded by and economically integrated with South Africa, Lesotho relies on customs duties from the Southern Africa Customs Union for government revenue and remittances from laborers employed in South Africa for much of its national income. Principal exports include diamonds and water. Lesotho has the world’s third-highest HIV rate.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 49.0 Create a Graph using this measurement

The August 2014 failed military coup shook Lesotho’s political institutions, temporarily closed the courts, and left lasting tensions. Corruption remains pervasive in all sectors of government and public services, and cronyism is prevalent in state bidding procedures. The judiciary is relatively independent but politicized and chronically underfunded. Protection of private property rights is ineffective, but expropriation is unlikely.

Limited GovernmentView Methodology

The top personal income tax rate is 35 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax and a tax on dividends. Overall tax revenue equals 47.3 percent of national income. Government spending has reached over 60 percent of GDP. The deficit has been around 2 percent, and public debt equals about 46 percent of total domestic output.

Regulatory EfficiencyView Methodology

The entrepreneurial environment remains hampered by regulatory inefficiency and a lack of transparency. The cost of licensing requirements still equals almost 10 times the average annual income. The labor market remains inefficient, and informal labor activity is high. The government increased food subsidies in 2015 and influences prices through state-owned enterprises. The volatility of the South African rand affects monetary stability.

Open MarketsView Methodology

Lesotho’s average tariff rate is 2.1 percent. A license may be required to import used clothing and cars. Additional controls apply to agricultural imports and exports. There is no general screening of foreign investment. Much of the population lacks adequate access to banking services. The high cost of credit hinders entrepreneurial activity and the development of a vibrant private sector.

Country's Score Over Time

Bar Graph of Lesotho Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Lesotho to other economic country groups Download Charts

Regional Ranking

rank country overall change
1Mauritius74.7-1.7
2Botswana71.11.3
3Cabo Verde66.50.1
4Rwanda63.1-1.7
5Ghana630.0
6Seychelles62.24.7
7South Africa61.9-0.7
8Namibia61.92.3
9Madagascar61.1-0.6
10Côte d'Ivoire 601.5
11Swaziland59.7-0.2
12Benin59.30.5
13Uganda59.3-0.4
14Burkina Faso59.10.5
15Gabon590.7
16Zambia58.80.1
17Tanzania58.51.0
18Senegal58.10.3
19Kenya57.51.9
20Nigeria57.51.9
21The Gambia57.1-0.4
22São Tomé and Príncipe 56.73.4
23Mali56.50.1
24Djibouti56-1.5
25Mauritania54.81.5
26Niger54.3-0.3
27Cameroon54.22.3
28Burundi53.90.2
29Togo53.60.6
30Guinea53.31.2
31Mozambique 53.2-1.6
32Comoros52.40.3
33Sierra Leone52.30.6
34Liberia52.2-0.5
35Guinea-Bissau51.8-0.2
36Malawi51.8-3.0
37Ethiopia51.50.0
38Lesotho50.61.0
39Angola48.91.0
40Democratic Republic of Congo46.41.4
41Chad46.30.4
42Central African Republic45.2-0.7
43Equatorial Guinea43.73.3
44Republic of Congo 42.80.1
45Eritrea42.73.8
46Zimbabwe38.20.6
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