Modest growth anticipated – CBL

The Central Bank of Lesotho says domestic growth is anticipated to be modest amid rising uncertainties and vulnerabilities as projections have remained broadly unchanged since its last Monetary Policy Committee (MPC) meeting.

Rising global uncertainty and domestic vulnerabilities particularly those related to trade and development agreements, pose downside to the outlook.

CBL made this disclosure at the 112^th meeting by the MPC on Tuesday this week.

During the meeting this week, the first deputy governor of Central Bank, Lehlomela Mohapi said the domestic economic activity was estimated to have contracted by 4.5 per cent in January 2025, in contrast to the expansion recorded in the previous month.

Mohapi said the contraction was broad-based, primarily reflecting weak domestic demand and reduced activity in the manufacturing, construction and transparent services industries.

He further said the domestic inflation increased to 4.1 per cent in February from 3.6 per cent in January 2025.

“This was due to increases in prices of food and non-alcoholic beverages, housing, electricity, gas and other fuel, as well as the transport category.

“The rise in food prices was mainly driven by supply-side constraints amidst a surge in white maize demand,” he uttered.

However, Mohapi said in the near term, inflation is expected to remain moderate, reflecting modest pressures from non-food inflation, although upside risks persist.

According to the MPC, broad money supply contracted by 2.5 percent in January, reversing the 2.4 percent increase recorded in December 2024.

The MPC said the decline was mainly due to a fall in transferable deposits held by the business sector, reflecting weaker economic activity and lower consumer spending. However, private sector credit expanded mainly reflecting increased lending business enterprises while household loans declined.

“Government budgetary operations recorded an estimated surplus of 22.1 percent of gross domestic product (GDP) in January 2024, reversing the 0.3 percent deficit observed in December 2024.

“This surplus was primarily driven by South African Custom Union receipts, which ked to revenue increasing faster than expenditure.

“Meanwhile, the public debt stock as percentage of GDP declined to 58.0 per cent from the revised 58.4 per cent in the previous month, mainly due to exchange rate gains.

The CBL’s Net International Reserves (NIR) declined by approximately US$105.23 million to US$998.96 million on March 13 2025 from US$1104.19 million on January 23, 2025. This was mainly driven by commercial banks’ net outflows.

The NIR position is projected to improve in the near to medium term.

In light of the developments, the MPC decided to maintain NIR target floor at US$840 million to ensure sufficient reserves for sustaining the one-to-one peg between the loti and rand.

NIR has also decided to keep the CBL rate at 7.25 per cent annum to align with prevailing domestic economic conditions and the broader regional monetary policy environment.