Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

LESOTHO

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: March 5, 1997.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictionsNo.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Lesotho is the Lesotho loti.
Other legal tenderThe South African rand is also legal tender.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementThe loti is pegged to the South African rand at M 1 per R 1.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketADs are permitted to conduct forward exchange operations through their correspondent banks abroad at rates quoted by the latter. Forward exchange cover, however, is not common in Lesotho.
Official cover of forward operationsYes.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirementsSettlements by or with residents of CMA member countries with all countries outside the CMA may be made to and from a nonresident account in rand or in any other foreign currency.
Use of foreign exchange among residentsYes.
Payments arrangements
Regional arrangementsLesotho is a member of the CMA, within which payments are unrestricted, except that transactions must be reported for statistical and customs purposes. In its relations with countries outside the CMA, Lesotho applies exchange controls that are largely similar to those applied by Namibia, South Africa, and Swaziland.
Administration of controlThe Central Bank of Lesotho (CBL) controls foreign exchange transactions and delegates to commercial banks the authority to approve certain types of current payments up to established limits. Permits are issued by the Department of Customs and Excise based on the recommendation of the Department of Trade and Industry. Licenses for financial institutions accepting deposits, insurance companies, brokers, and agents are issued by the CBL.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)
On domestic ownership and/or tradeOnly ADs may trade in gold, but anyone may hold gold.
On external tradeExports of gold from the CMA by individuals are subject to controls.
Controls on exports and imports of banknotes
On exports
Domestic currencyExports of domestic currency from Lesotho are subject to controls.
Foreign currencyExports of foreign currency from the CMA by residents are subject to controls; visitors may reexport the unspent portion of foreign currency brought into the country.
References to legal instruments and hyperlinksn.a.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyResidents may deposit up to the equivalent of M 250,000 in foreign exchange accounts with an AD in Lesotho without approval.
Held abroadNo.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyNo.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsNo.
Blocked accountsFunds in an emigrant’s blocked loti account may be invested in quoted securities and other such investments approved by the CBL. The free transfer of income from an emigrant’s blocked assets is limited to M 300,000 a family a year.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsPayments are not normally allowed before the date of shipment, except with prior approval or special authorization from the CBL. ADs may permit, without the CBL’s approval, advance payments of up to 33.3% of the ex-factory cost of capital goods if suppliers require it or if it is normal practice in the trade concerned.
Documentation requirements for release of foreign exchange for imports
Domiciliation requirementYes.
Preshipment inspectionYes.
Letters of creditYes.
Import licenses used as exchange licensesYes.
OtherYes.
Import licenses and other nontariff measuresLesotho is a member of the SACU; all imports originating in any country of the SACU are unrestricted, except certain food items. Imports from countries outside the SACU are usually licensed in conformity with SACU import regulations. Lesotho reserves the right to restrict certain imports. Import permits are valid for all countries and entitle the holder to buy the foreign exchange required to make payments for imports from outside the SACU.
Negative listWith certain exceptions, imports from outside the SACU must be licensed and conform to a negative list (e.g., ammunition, flora and fauna, and illegal drugs).
Licenses with quotasSome food imports from countries within the SACU are subject to import licensing.
Import taxes and/or tariffsLesotho applies the external customs tariffs of the SACU.
State import monopolyNo.
References to legal instruments and hyperlinksn.a.
Exports and Export Proceeds
Repatriation requirementsAll export proceeds must be repatriated.
Surrender requirements
Surrender to authorized dealersResidents may retain their export proceeds in foreign currency accounts with ADs for six months, after which point balances must be surrendered to ADs.
Financing requirementsA state-supported export credit and guarantee scheme provides credit guarantees, pre- and post-shipment credits, and insurance against commercial and political risks.
Documentation requirements
Letters of creditYes.
GuaranteesYes.
DomiciliationYes.
Preshipment inspectionYes.
Export licenses
Without quotasCertain exports are subject to licensing for revenue purposes; this requirement, in practice, is limited to the exportation of diamonds. Most exports are shipped without license to or through South Africa.
Export taxesNo.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Investment-related paymentsProfit and dividend transfers are not restricted, provided the investment funds were not obtained through excessive use of local borrowing facilities.
Quantitative limitsEmigrants may transfer up to the equivalent of M 300,000 of earnings on blocked assets.
Indicative limits/bona fide testYes.
Payments for travel
Quantitative limitsThe limit for an adult is the equivalent of M 130,000 a year, and the limit for a child under 12 years of age is M 40,000.
Indicative limits/bona fide testLarger allowances may be obtained for business travel.
Personal payments
Quantitative limitsFor study abroad, the limits are the equivalent of M 160,000 a year for a single student or M 180,000 a year for a student accompanied by a spouse who is not studying.
Credit card use abroad
Quantitative limitsThe limit for credit card use abroad is the equivalent of M 20,000.
Indicative limits/bona fide testYes.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Surrender requirementsProceeds must be surrendered within 30 days of the date of accrual, unless an exemption is obtained.
Surrender to the central bankn.a.
Surrender to authorized dealersn.a.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsn.a.
Surrender requirementsn.a.
Controls on capital and money market instrumentsNonresidents may invest freely in Lesotho if the maturity of the investment exceeds 365 days. CBL notification is required for nonresidents to acquire securities of any kind, regardless of maturity.
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Sale or issue abroad by residentsYes.
Bonds or other debt securities
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
On money market instruments
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
On collective investment securities
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
Controls on derivatives and other instrumentsThese instruments are not available in Lesotho.
Controls on credit operations
Commercial credits
By residents to nonresidentsExport credits are available for up to six months; in certain circumstances, the maturity can be extended by six months. Longer-term credits require exchange control approval.
To residents from nonresidentsThese credits require exchange control approval.
Financial credits
By residents to nonresidentsThese credits require prior approval. However, wholly nonresident-owned subsidiaries may borrow locally up to 100% of the total shareholders’ investment.
To residents from nonresidentsPrior approval is required to ensure that repayments and servicing of the loans do not disrupt the balance of payments and that the interest rate paid is reasonable in terms of prevailing international rates.
Controls on direct investmentThe rulings on applications for inward and outward capital transfers may depend on whether the applicant is a resident, a foreign national who is a temporary resident, or a nonresident.
Outward direct investmentResidents are free to invest abroad through domestic banks up to the equivalent of M 250,000 a person. Subject to CBL approval, resident corporations and businesses are allowed to invest abroad up to the equivalent of M 50 million in SACU countries or M 30 million in other countries.
Inward direct investmentNonresidents may invest freely in Lesotho if the maturity of the investment exceeds 365 days. However, CBL approval is required for nonresidents to acquire securities of any kind, regardless of maturity.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase abroad by residentsPrior approval is required.
Controls on personal capital transactions
LoansPrior approval for these transactions is required.
Transfer of assets
Transfer abroad by emigrantsEmigrants may transfer abroad up to the equivalent of M 300,000 a year.
Transfer of gambling and prize earningsPrior approval is required.
References to legal instruments and hyperlinksn.a.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Lending locally in foreign exchangeYes.
Purchase of locally issued securities denominated in foreign exchangeNo securities denominated in foreign currency are available in Lesotho.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsYes.
Liquid asset requirementsYes.
Open foreign exchange position limitsThe limits are 10% a currency and 20% of overall exposure.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on investment portfolio held abroadThe limit is up to 20% of assets under management.
Pension fundsn.a.
Investment firms and collective investment fundsn.a.
References to legal instruments and hyperlinksn.a.
Changes during 2006
No significant changes occurred in the exchange and trade system.

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