By Thoboloko Ntšonyane
MASERU
The Central Bank of Lesotho (CBL) has reduced its policy rate by 25 basis points, bringing it down to 7.25% from 7.50% rate per annum.
This decision was announced by the CBL’s Governor Dr Maluke Letete following the 111th meeting of the Monetary Policy Committee (MPC).
The adjustment aims to support economic stability and growth and this is a consecutive decrease since since previous MPC meeting held in November 2024.
By easing CBL lending rate, the Bank seeks to create a more favourable lending environment.
Dr Letete, who is also the MPC Chairperson, noted that the Bank will continue to monitor economic indicators closely to ensure monetary policy remains effective in fostering sustainable growth.
“Domestic economic activity was estimated to have expanded by 3.1 per cent in November 2024, up from 1.5 per cent in the previous month. This growth was primarily driven by stronger domestic demand, supported by both consumer spending and robust export growth.
“Despite challenges in the construction subsector, expansion was broad-based. Looking ahead, growth is expected to remain steady but uneven in the medium term, amid uncertainty in the export market,” he said.
The MPC Chairperson also highlighted that the broad money supply increase in the fourth quarter of 2024 owing to a rise in transferable deposits held by the business. “Private sector credit also expanded, reflecting higher lending to both households and business enterprises.”
The MPC resolved to increase the net international reserves (NIR) target floor from $770 million about M14.3 billion to $840 million, approximately M15.6 billion. This is to ensure the one to one peg between Loti and the South African Rand.
Dr Letete further announced that the government’s budgetary operations have suffered a deficit of 4.8% of the gross domestic product (GDP) in November last year due to a decline in revenue that outpaced the reduction in expenditure.
He said the public debt stock as a GDP’s percentage increased to 56.2% from a revised 55.7% during the previous quarter reflecting disbursements for ongoing foreign-funded projects.
Reacting to the temporary withdrawal of United States aid for 90 days, the Governor warned it could have significant long-term consequences for Lesotho if it is to be permanent.
“There are going to be huge implications for the economy,” he said.
While the African Growth and Opportunity Act (AGOA) is not classified as aid but rather a trade arrangement that grants access to US markets, its potential implications for the country cannot be ignored. The loss of aid, coupled with any disruptions to AGOA benefits are feared to further strain the economy and contribute to rising unemployment.
Dr Letete described the global uncertainty surrounding aid as a “wake-up call,” emphasising that dependence on foreign assistance is not a sustainable strategy. He cautioned that, in the absence of US aid, the government would have to shoulder the financial burden of subsidising essential medication for citizens who previously relied on this support.