MASERU – In its 105th Monetary Policy Committee (MPC) meeting, the Central Bank of Lesotho (CBL) has decided to raise the target for net international reserves (NIR) to US$750 million (M14.1 billion) from US$710 million (13.4 billion). Dr Maluke Letete, the Governor of CBL, said this adjustment is necessary to ensure the stability of the Loti currency against the South African Rand. Additionally, the Committee has chosen to keep the CBL rate unchanged at 7.75 percent per annum.
He added that in November last year there was a contraction in domestic economic activity, which followed a period of stronger growth in the previous month. “Headline inflation increased to 7.2 percent in December 2023 from 6.8 percent in November 2023. Domestic contributors to the high inflation were food, energy and clothing prices, while the external drivers were the weak exchange rate and renewed geopolitical tensions.
“This continued weaker loti, volatile commodity prices and the climate-related events present risks to the medium-term inflation outlook. Broad money supply increased in November 2023. This growth was supported by the increase in net domestic assets as well as increased private credit, largely underpinned by credit extended to households. However, the rise was moderated by the fall in net foreign assets,” said Dr Letete.
Apart from that he said government operations registered a deficit equivalent to 5.6 percent to GDP (gross domestic product) marginally declined by 0.3 percent. Taking stock of the global economies, MPC noted that inflation rates increased in some advanced and emerging market economies while they declined in others in December 2023.
This rise of inflation was attributable to food prices hike as well as alcoholic beverages and tobacco. CBL Governor showed that economic activity in selected advanced markets economies was generally expected to improve in the fourth quarter of 2023. The neighbouring South Africa’s economic activity was expected to be supported by rebounds in the mining and manufacturing sectors, despite the country’s infrastructure and logistical hurdles.
“The Committee will continue to closely assess the global economic developments and their impact on the domestic economy, especially the NIR and respond accordingly,” said the Chairperson of the MPC.