By: Thoboloko Ntšonyane
MASERU – The Central Bank of Lesotho (CBL) has announced that it will maintain the interest rate at 7.75% per annum. This decision was revealed during the tabling of the Monetary Policy Committee (MPC) report following its 108-meeting held on July 23.
This decision means that individuals and businesses with loans from commercial banks can rest assured that there will be no upward adjustments to their loan interest rates, as commercial banks borrow from the CBL at this maintained rate.
The CBL Governor who doubles as the MPC Chairperson Dr Maluke Letete said the move reflects the Committee has resolved to maintain the Net International Reserves (NIR) at $760 million about M14 billion. The Committee said whatever will happen the Bank is prepared to respond accordingly.
The MPC Chairperson highlighted that the CBL’s NIR increased by approximately $119.29 million about M2,1 billion between May 2024 and 18th of July 2024. This growth is said was on account of the Southern African Customs Union (SACU) receipts and increased water royalties during the same period.
He projected that the NIR is expected to improve in the next three quarters to March 2025, with “cyclical peaks and troughs”.
He said this move will see Loti pegged on a one to one ratio with South Africa’s Rand.
The Committee has forecasted the global economic growth by 3.2% in 2024 with a slight upward revision of 3.3% in 2025. It said: “This is expected to be largely underpinned by strong growth from emerging markets and developing economies such as India and China. Risks to global growth include elevated inflation, renewed trade tensions and escalating geopolitical conflicts.”
Dr Maluke said the government has experienced a 1.7% deficit in May 2024 of the gross domestic product (GDP) and this he said should not be “worrisome”.
He said the government should have a sustainable deficit which does not pose a problem as the government has got to spend in order for economic activity to take place.
“The government should spend more, but in a manner that consolidates capital projects,” he said.
The MPC noted that the economic activity was generally divergent for most selected, advanced and emerging market economies during the first quarter of 2024.
The Committee also showed that domestic economic activity climbed for the second consecutive month in May before registering 1% following 0.9% growth that was experienced in April.
This growth, the Governor highlighted, was attributable to a stronger performance in construction and the financial services sector. The major contributor to this inflation rise was food and non-alcoholic, alcoholic beverages.
He added: “Domestic headline inflation rose to 6.5% in June 2024 from 6.3% in May 2024.”
The Committee however said the domestic demand and manufacturing sector activity moderated expansion. It also expressed concern over the closure of some of the factories that further contributes to job losses.
The committee noted that in the near term, growth is expected to be strong, mainly due to the ongoing construction activity at the highlands.
The CBL First Deputy Governor Lehlomela Mohapi side as things are, the CBL does not have pressure from the reserves point of view.
“To the extent that we have adequate reserves to back Loti we are comfortable,” stated the CBL’s Director of Research, Dr Tanka Tlelima.