Africa-Press – Lesotho. The statement of the Monetary Policy Committee (MPC) from its 72nd meeting has it that Lesotho’s economic performance is estimated to remain sluggish during the first quarter of 2018 and that the labour market developments showed mixed signals in the same quarter.
This statement was read by the Central Bank of Lesotho (CBL) Governor, Dr Retšelisitsoe Matlanyane at the press conference that was held at the bank premises on Tuesday.
According to Matlanyane, MPC held its meeting on Tuesday where it considered international, regional and domestic economic developments and financial market conditions.
She said that was done in order to determine an appropriate monetary policy stance necessary to maintain macroeconomic stability. As for the labour market showing mixed signals, she said both the number of migrant mineworkers and public sector employees has declined.
On the other hand, she said the manufacturing sector added more jobs, as orders increased. She also outlined that inflation rate remained subdued since the beginning of 2018.
“The rate of inflation, as measured by changes in the consumer Price Index (CPI), increased to 4.0 per cent in June compared to 3.8 per cent in May 2018
“The subdued rate is attributable mainly to the food and non-alcoholic beverages component, which accounts for the largest share of the CPI basket,” emphasized Matlanyane, going on to cite that there are risks due to expected increases in administered prices and continuing exchange rate depreciation.
She said the measure of supply (M2) has declined by 1.1 per cent between May 2018. The contributing factor was a sharp decrease in Net Foreign Assets (NFA), with both official and commercial banks’ NFA declining.
In contrast, she said total private sector credit grew by 2.2 percent in May 2018, compared to a negligible increase in April 2018. “Growth in private sector credit was driven mainly by the credit to the business sector, which grew by 5.9 per cent.
In addition, household credit has maintained a robust upward trend. In turn, commercial banks’ credit to deposit ratio rose from 53.7 percent registered in April to 55.6 per cent in May” she said.
The domestic macro-economic outlook she said indicates that real economic activity will recover in the medium-term driven by good performance in the primary and secondary sectors.
In particular, the mining sub-sector will register strong growth attributable to commencement of commercial operations and reaching of full-production in some mines.
She said the Lesotho Highlands Water Project Phase II (LHWP) advanced infrastructure works will boost the construction sub-sector while the services sector will remain under stress due to weak domestic demand.
Having considered these developments, she said the MPC decided to decrease the Net International Reserves (NIR) target floor US$870 million to US$800 million.
At the level where NIR positions is sufficient to maintain the peg between the Loti and the Rand. She said the MPC also decided to maintain the CBL rate unchanged at 6.50 percent per annum.
