Lesotho Economy Gets a Reprieve as AGOA Runs to 2028

Lesotho's economy received a temporary reprieve when the African Growth and Opportunity Act (AGOA) was extended until the end of 2028. This trade preference allows the country to export garments duty-free to the United States, which makes up about 35% of Lesotho's exports. The extension came after the AGOA expired on 30 September 2025, leading to cancelled orders, production slowdown, and factory closures.

The United States imposed a 15% tariff on Lesotho garments in August 2025, which was later lifted through the AGOA extension. The extension also included the third country fabric provision, allowing Lesotho, a landlocked country without textile mills, to continue exporting garments. The garment industry employs around 34,000 workers, with a large portion being women.

Unemployment in Lesotho was above 30% before the AGOA extension. Development researchers estimate that each garment worker supports about four dependants. The extension is crucial for the industry's growth, as apparel buyers plan and site decisions several years in advance. While the extension addresses a named risk, it does not change the overall growth model, as the World Bank and IMF estimate continued slow growth in the textile sector and other challenges.

Lesotho's public finances heavily rely on customs union receipts from the Southern African Customs Union, remittances, and water royalties, all of which have declined or are projected to decline. The country is currently building the second phase of the Lesotho Highlands Water Project, which is expected to provide reliable demand for the garment sector and offset other weaknesses in the economy.