Downgrade of Lesotho

Press release - 29 JUN 2017

Together with the OECD, the Swedish Export Credits Guarantee Board (EKN) has conducted a review of countries in southern and eastern Africa. Development in Lesotho has resulted in an increased credit risk, and the country has now been downgraded.

Lesotho has been downgraded to country risk category 6 from 5

“Lesotho’s public finances have progressively worsened and the political situation has deteriorated,” says Julia Ekberg, Country analyst at EKN.

Lesotho is a small monarchy with around two million residents, and is surrounded by South Africa. A large portion of the country’s GDP comes from remittances from mining work in South Africa.

“The falling cost of raw materials has had a strong impact on the country, as many miners in South Africa became unemployed and returned home to Lesotho without finding new employment,” says Julia Ekberg.

The deterioration to economic and political development also means that Lesotho risks exclusion from the American free trade agreement, AGOA (African Growth and Opportunity Act).

“Loss of the agreement will have great consequences for the vital textile production in Lesotho,” says Julia Ekberg.

EKN’s outstanding guarantees for exports to Lesotho amount to SEK 24 million.

About the EKN country risk category

EKN monitors developments in the countries of the world and assesses the risk of payment problems. The assessments are summarised in a country policy in which we state the country risk category on a scale of 0 to 7. The lower the number, the better the country's creditworthiness. Assessments are made continuously, as well as in annual regional reviews in collaboration with other OECD countries.