The Economy of Lesotho is based on agriculture, livestock, manufacturing, and the earnings of laborers employed in South Africa. Lesotho is geographically surrounded by South Africa and economically integrated with it as well. The majority of households subsist on farming or migrant labor, primarily miners in South Africa for 3 to 9 months. The western lowlands form the main agricultural zone. Almost 50% of the population earn some income through crop cultivation or animal husbandry with nearly two-thirds of the country's income coming from the agricultural sector.
Water is Lesotho's only significant natural resource. It is being exploited through the 30-year, multi-billion dollar Lesotho Highlands Water Project (LHWP), which was initiated in 1986. The LHWP is designed to capture, store, and transfer water from the Orange River system and send it to South Africa's Free State and greater Johannesburg area, which features a large concentration of South African industry, population and agriculture. At the completion of the project, Lesotho should be almost completely self-sufficient in the production of electricity and also gain income from the sale of electricity to South Africa. The World Bank, African Development Bank, European Investment Bank, and many other bilateral donors are financing the project.
Until the political insecurity in September 1998, Lesotho's economy had grown steadily since 1992. The riots, however, destroyed nearly 80% of commercial infrastructure in Maseru and two other major towns in the country, having a disastrous effect on the country's economy. Nonetheless, the country has completed several IMF Structural Adjustment Programs, and inflation declined substantially over the course of the 1990s. Lesotho's trade deficit, however, is quite large, with exports representing only a small fraction of imports.
Lesotho has received economic aid from a variety of sources, including the United States, the World Bank, the United Kingdom, the European Union, and Germany.
Lesotho has nearly 6,000 kilometers of unpaved and modern all-weather roads. There is a short rail line (freight) linking Lesotho with South Africa that is totally owned and operated by South Africa.
Lesotho, is a member of the Southern African Customs Union (SACU) in which tariffs have been eliminated on the trade of goods between other member countries, which also include Botswana, Namibia, South Africa, and Swaziland. Lesotho, Swaziland, Namibia, and South Africa also form a common currency and exchange control area known as the Rand Monetary Area that uses the South African rand as the common currency. In 1980, Lesotho introduced its own currency, the loti (plural: maloti). One hundred lisente equal one loti. The Loti is at par with the rand.
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