Lesotho faces rising economic risks as the ongoing Iran conflict threatens to trigger a broader downturn, with experts warning of increased unemployment, weaker public finances, and reduced remittance inflows.
According to the April 2026, Africa Economic Update by the World Bank, in recent years Gulf countries have merged as significant investors across Africa, with greenfield foreign direct investment commitments in Sub-Saharan Africa exceeding US$100 billion in 2022-2023 alone.
However, the ongoing conflict risks slowing down this momentum, as sovereign wealth funds reassess exposure and investment priorities, potentially delaying large-scale projects in energy (including hydrogen, solar, and wind projects), infrastructure (ports, warehouses and data centres), logistics, mining and agriculture.
“The conflict has also increased risks to remittance flows, a critical lifeline for many African households, particularly in highly remittance-dependent countries such as the Comoros, The Gambia, Lesotho, and Liberia,” the report said.
It warned that prolonged conflict could further reduce inflows as weaker labour demand, slower hiring, and hiring repatriations affect sectors such as hospitality and construction.
It further indicated that economic growth in Sub-Saharan Africa is projected to remain at 4.1 percent in 2026, unchanged from 2025, but downside risks are increasing.
The region’s recovery from successive global shocks is losing steam, with growth projections for 2026 revised downward by 0.3 percentage points from forecasts previously published in the October 2025 edition of Africa’s Pulse.
In an interview with theReporter last week, a local economist, Majakathata Mokoena, said the Iran conflict could plunge the world into recession if it persists.
He noted that this could pose big economic risks to Lesotho because the country disproportionately depends on others for consumer products and financing its economy.
A decline in import/export traffic at ports in South Africa would also declining Southern Africa Custom Union revenues, further negatively affecting Lesotho’s fiscal health.
“Lesotho largely depends on South Africa for its remittances. Any economic shock affecting South Africa would certainly affect Lesotho. The country does not have significant remittances from the Gulf States. There is no exchange rate differential between the South African Rand and the Lesotho,” Mokoena pointed out.
He suggested that Lesotho could increase its self-reliance, especially in agriculture, to cushion its economy from global shocks.
On the other hand, Executive Director of the Migrant Workers Association of Lesotho, Lerato Nkhetṧe said Basotho working in South Africa might be forced to return home as the neighbouring country’s economy feel the wrath of the Iran conflict.
Besides a sharp decline in remittances, Lesotho’s economy could take a nose dive. Worse still the country does not have capacity to absorb the returning migrants as it is already saddled with high unemployment.
Nkhetṧe noted that the current budget does not mention anything about accommodating Basotho returning from South Africa.
“There is nothing in the current budget addressing returning Basotho, and unemployment is likely to rise,” he indicated, adding that agriculture could be a viable alternative to boost the local economy.
“We have large tracts of underutilised land suitable for livestock production and sheep and cattle exports.”
