Executive summary judiciary by increasing the number of judges and support staff; enact all outstanding bills; review the decentralisation process with the objective of identifying measures that could expedite its institutionalisation and provide certainty with regard to its direction; and improve the promotion and protection of human rights and liberties by setting up a human rights commission and by increasing awareness of human rights issues through public education and information dissemination. 4.2 Economic governance and management 6 4.13 Economic policy making in Lesotho has historically been influenced in the main by geography, regional integration arrangements and special trade arrangements. In view of the overwhelming impact of these factors, successive governments in Lesotho appeared (until recently) to have little incentive to design and implement comprehensive, long-term economic development strategies to address the key constraints to sustainable growth and development in the country. 4.14 Lesotho is mainly a mountain country with arable land estimated at only 9 per cent of its total area of 30,335 square kilometres. Yet, agriculture provides employment and income for the majority of the population of the country. 4.15 Lesotho is a landlocked country that is entirely surrounded by one country – South Africa. Thus, even in the absence of any formal arrangements, Lesotho’s development strategies, and investment and trade policies, have been closely influenced by those of South Africa. This provides a strong justification for the country to engage in regional integration arrangements. In addition to membership of the SADC, Lesotho is a signatory to the SACU and the CMA, which comprises South Africa, Lesotho, Namibia and Swaziland. SACU arrangements provide for the sharing of customs revenue among member countries according to an agreed formula. SACU revenue accounted annually for over 50 per cent of public revenue in Lesotho during the period from 2002 to 2008 and is therefore a major determinant of both public expenditure and national income. 4.16 According to the CMA arrangement, the South African Reserve Bank determines the exchange rate of the rand and the loti is kept at par with the rand, which is also legal tender in Lesotho. The CMA also allows for unrestricted movement of capital across member states. This reduces transaction costs and foreign exchange risk with regard to trade between Lesotho and South Africa, decreases exchange rate volatility by pegging the domestic currency to a relatively stable currency, and encourages fiscal discipline and improved reserve management in Lesotho. Thus, interest rate and inflation dynamics in Lesotho and South Africa are closely related. However, the institutional arrangements of the CMA do not permit the pursuit of an independent exchange rate policy by Lesotho. The role of monetary policy is confined to the maintenance of price stability and adequate international reserves to support the rand/loti exchange rate. The CBL also uses openmarket operations to control domestic liquidity through the sale and purchase of treasury bills. 4.17 Other external arrangements impacting on economic governance and management in Lesotho include the Multi-Fibre Agreement (MFA) and the AGOA. 4.18 Despite its physical constraints and the limitations on its scope for independent economic policies, Lesotho’s policy framework and development strategies that are conducted in the context of these