The economy of Lesotho is based almost entirely on agriculture, farm animal raising, and the earnings of Basothos employed outside the nation. About two-fifths of the adult male labor force works in South Africa. Gross domestic product, which does not reflect remittances from workers out of the nation, stood at $874 million in 1999, or $420 per person. Tourism, particularly from South Africa, has expanded rapidly. In 1998 the around annual budget included revenues of $392 million with expenditures totaling $442 million.

Lesotho is a poor nation, and its few natural resources are insufficient for even the present population. unexploited uranium deposits found near Teyateyaneng, about 30 miles (50 km) northeast of Maseru, could introduce a remarkable boost to Lesotho's economy. Its economy could not be sustained at all without the benefits it derives from South Africa, with which Lesotho forms part of a customs union and shares an integrated communications system. It has also depended heavily on South Africa for employment for much of the working population, although opportunities for Sotho there became far more restrictive in the mid-1990s. About one-third of the male working population is unemployed.

Small, landlocked, and mountainous, Lesotho's primary natural resource is water. Its economy is based on subsistence agriculture, farm animal, and remittances from miners employed in South Africa. The number of such mineworkers has declined steadily over the past several years. A small manufacturing base depends largely on farm products that support the milling, canning, leather, and jute industries. Agricultural products are exported primarily to South Africa. Proceeds from membership in a common customs union with South Africa form the majority of government revenue. Although drought has decreased agricultural activity over the past few years, completion of a major hydropower facility in January 1998 now permits the sale of water to South Africa, generating royalties for Lesotho. The pace of substantial privatization has increased in recent years. In December 1999, the government embarked on a nine-month IMF staff-monitored program aimed at structural adjustment and stabilization of macroeconomic fundamentals. The government is in the process of applying for a three-year successor program with the IMF under its Poverty Reduction and Growth Facility.