Lesotho’s economic growth is being constrained by deep-rooted structural weaknesses, with limited export capacity, excessive dependence on imports and a narrow industrial base emerging as major barriers to sustainable economic expansion, job creation and long-term economic resilience.
According to the Lesotho National Development Corporation (LNDC), the country faces a persistent balance-of-payments constraint in which import spending consistently exceeds export earnings, leaving the economy vulnerable to recurring slowdowns and external shocks.
In its recently launched Letsema Strategy 2026-2031, the corporation states that as income rise, demand for imported goods such as food, fuel, machinery and industrial inputs grows rapidly, while export growth remains weak and unable to keep pace.
“Exports do not expand at the same pace,” the LNDC said.
The strategy warns that this imbalance continues to place pressure on foreign exchange reserves and weakens the country’s ability to sustain growth over long periods, and as a result, the economy experiences repeated boom-and-slowdown cycles that prevent meaningful structural transformation.
“The economy repeatedly experiences short bursts of expansion followed by periods of slowdown,” the strategy notes.
The corporation argues that Lesotho’s inability to consistently grow beyond the five-to-six percent range reflects what it describes as a “structural speed limit” on economic growth.
The report identifies over-dependence on imports and weak economic diversification as central drivers of the problem.
According to the LNDC, Lesotho’s production base remains limited both in diversity and sophistication, restricting the country’s ability to produce competitive, high-value goods capable of strengthening exports and generating quality employment.
“Lesotho’s export basket is characterised by limited diversification and a dominance of low value-added goods, which undermines its potential for export-led economic growth,” the strategy states.
Currently, Lesotho’s exports are concentrated largely in basic apparel, rough diamonds, unprocessed wool and mohair, and water exports, sectors that provide limited value addition and weaker industrial linkages within the domestic economy.
The strategy suggests that this reliance on largely raw or low-value exports effectively results in the export of potential jobs and industrial opportunities that could otherwise stimulate broader economic activity.
In contrast, advanced economies export complex products such as pharmaceuticals, precision equipment and specialised machinery, industries that depend on advanced industrial capabilities, skilled labour, research capacity and technological innovation, areas where Lesotho remains underdeveloped.
The LNDC further warns that without stronger industrialisation and diversification, Lesotho will continue struggling to generate sufficient foreign exchange, deepen domestic production capacity and reduce vulnerability to external economic pressures.
Against this backdrop, the corporation has launched the Letsema Strategy, anchored on four mutually reinforcing pillars: driving industrial transformation, unlocking capital for growth, orchestrating the national industrial ecosystem, and building the capabilities required to deliver results.
The strategy positions the LNDC as a central coordinator of industrial development through partnerships with government, the private sector and development institutions.
At the centre of the strategy is an ambition to transform Lesotho’s economy by 2031 through five major outcomes aimed at expanding employment, diversifying production, strengthening industrial capacity and improving economic resilience.
One of the headline targets is the creation of 50,000 new jobs and the development of at least 100 new industrialists during the strategy period.
“The first defining outcome of the strategy is the creation of 50,000 new net jobs facilitated by LNDC by March 2031. Employment creation is the most direct channel through which industrial development raises income and improves livelihoods. Expanding productive employment opportunities is therefore central to fulfilling LNDC’s mandate.”
The corporation also plans to establish five new industrial sectors as part of efforts to broaden the country’s productive base and reduce dependence on a narrow range of industries.
“This objective reflects a deliberate effort to diversify Lesotho’s productive and export base, which currently remains concentrated in a narrow range of industries,” the strategy states.
“Together with the deepening of product sophistication and industrial capabilities, it seeks to transform Lesotho’s economy from: a narrow and low value-added industrial structure, into, a diversified and higher value-added industrial economy.”
The strategy further seeks to help Lesotho break its historical growth ceiling by targeting an annual GDP per capita growth rate of seven percent by March 2031.
“By the end of the strategic period, which is March 2031, the strategy targets an annual nominal exit GDP per capita growth rate of 7 percent. The trajectory toward this growth target is expected to progress gradually as industrial investments translate into expanded productive capacity.”
Another key concern raised in the strategy is Lesotho’s weak standing in global measures of economic sophistication.
The LNDC identified improving Lesotho’s Economic Complexity Index (ECI) ranking as one of the defining outcomes of the strategy.
The ECI measures the diversity and sophistication of products a country is capable of producing and exporting, with higher complexity levels generally associated with stronger productivity, higher incomes, greater export competitiveness and improved economic resilience.
“At present, Lesotho is the only country within the Southern African Customs Union (SACU) whose ECI score is not reported in the Atlas of Economic Complexity, largely due to export data quality limitations,” the strategy states.
“The strategy therefore sets a phased trajectory for improving Lesotho’s position within the global economic complexity framework.”
The LNDC argues that addressing Lesotho’s structural economic constraints will require strengthening export competitiveness, reducing excessive dependence on imports, improving industrial capabilities, upgrading skills development and building stronger linkages within the domestic economy.
The corporation also acknowledged the need to improve institutional effectiveness and strategic coordination to ensure that investments and programmes are aligned with clearly defined national priorities.
Without stronger coordination and implementation capacity, the strategy warns, efforts aimed at transforming the economy risk remaining fragmented and ineffective.
Summary
- The strategy warns that this imbalance continues to place pressure on foreign exchange reserves and weakens the country’s ability to sustain growth over long periods, and as a result, the economy experiences repeated boom-and-slowdown cycles that prevent meaningful structural transformation.
- At the centre of the strategy is an ambition to transform Lesotho’s economy by 2031 through five major outcomes aimed at expanding employment, diversifying production, strengthening industrial capacity and improving economic resilience.
- The corporation also plans to establish five new industrial sectors as part of efforts to broaden the country’s productive base and reduce dependence on a narrow range of industries.
Authored by our expert team of writers and editors, with thorough research.
