The Role of International Trade in Lesotho’s Economic Growth: A Review

• Main Authors: Malefa Malefane, Nicholas Odhiambo
• Format: Article
• Language: English
• Published: Danubius University 2016-10-01
• Series: Acta Universitatis Danubius: Oeconomica
• Subjects: trade policy; export-led growth; private sector-led economic growth; trade performance; Lesotho
• Online Access: http://journals.univ-danubius.ro/index.php/oeconomica/article/view/3385/3603

This paper investigates the role of international trade in Lesotho's economy. Over the years, the increasing role of international trade in the economy of Lesotho has become evident, particularly with the impetus from the country‘s export sector. An exploratory review approach has been used in this paper, in which the discussion mainly focuses on Lesotho‘s economic growth policy, trade policy, trends in economic growth, and trade performance. The findings point to the connection between Lesotho‘s economic growth and exports from the manufacturing sector, which driven by trade privileges. There is a further indication from this review that Lesotho‘s growth policy has been largely shaped by the country‘s need to pursue export-led growth and private-sector led growth. In recent years, developments in the country‘s trade policy have moved towards the implementation of a more liberal trade approach, as opposed to the initial import substitution industrialisation that Lesotho adopted in the 1960s. This change in trade policy has resulted in an enforcement of measures that have helped to enhance policy-driven trade. The graphical analysis shows that, generally, trends in Lesotho‘s economic growth correspond to the performance of the country‘s trade sector. Nevertheless, while international trade has made some significant contributions to Lesotho‘s economic growth, a heavy reliance on manufactured exports, which are known to be volatile to global economic downturns, poses some challenges to the country. Therefore, it is recommended that Lesotho relies on a wider range of exports, rather than manufactured exports, in order to strengthen trade-related growth in the country.