Africa-Press – Lesotho. The country’s economic activity may brace for the worse if Russia-Ukraine war continues, the Central Bank of Lesotho (CBL) has cautioned. The Acting CBL Governor who doubles as the Chairperson
of the Monetary Policy Committee (MPC) Lehlomela Mohapi said the Russia-Ukraine conflict does not abode well to both international and domestic economy.
This he said during the MPC 94th meeting held at the Bank on Tuesday this week. Mohapi highlighted the recently seen surge of fuel prices. He also continued that if the two nations do not agree to ceasefire
Lesotho can expect another hike in food prices. It is reported that about 40 percent of the European Union (EU) gas imports are from Russia. On the other hand, Ukraine is one of
the largest producers of grain in the world and supplies South Africa that is Lesotho’s immediate neighbour. When invading Ukraine on February 24, Russia President
Vladimir Putin said his mission is to “demilitarise and de-Nazify Ukraine”. He argued: “It is not our plan to occupy the Ukrainian territory. We do not intend
to impose anything by force. ” The Acting Governor said: “The Committee noted that the conflict between Russia and Ukraine is culmination of simmering geo-political
tensions and is expected to worsen the global macroeconomic environment. The war came at the turning point where global economic recovery was gaining traction mainly through higher energy and food prices.
“The global macroeconomic environment somewhat worsened partly due to the ongoing Russia-Ukraine war with elevated inflationary pressures.
The domestic economy registered some growth although there were job losses in some sectors monitored by the Bank. In relation to domestic price developments, inflationary pressures remained elevated.
” Lesotho was among countries that openly denounced the Russia invasion of Ukraine through voting against it at the United Nations (UN) General Assembly.
On the other hand, African countries such as South Africa, Angola, Mozambique, Zimbabwe, Madagascar, Algeria, Equatorial Guinea and Mali abstained from voting against Russia.
The ongoing ceasefire attempts between two conflicting states had been without success. The UN General Assembly had made a clarion call, saying: “End hostilities in Ukraine — now.
Silence the guns — now. Open the door to dialogue and diplomacy — now. “The territorial integrity and sovereignty of Ukraine must be respected in line with the UN Charter.
We don’t have a moment to lose. The brutal effects of the conflict are plain to see. ” The Committee also noted that the SA rand is expected to weaken during the second quarter of 2022.
“Having considered the Net International Reserve (NIR) developments and
outlook, regional inflation and interest rate outlook, domestic economic conditions and the global economic outlook, the MPC decided to: “Revise upwards the current NIR target floor of US$
790 million approximately M11.4 billion to US$820 million around M11.8 billion.
At this level, the NIR will remain consistent with the maintance of the exchange rate peg between the Loti and the SA rand. “Increase the CBL rate from 4.00 per cent per annum to
4.25 per cent per annum. The rate set at this level, will ensure that the domestic costs of funds remains aligned with the rest of the region,” the Committee had said. Further, the MPC has promised to continue with its
exercise of monitoring the global developments and their likely impact on the domestic macroeconomic conditions, particularly the NIR with a view to take
appropriate action should the need arise. Section 5 of the Central Bank of Lesotho Act of 2000, charges the bank with the responsibility to achieve and maintain price stability by ensuring that Loti is pegged with the Rand.
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