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Central Bank of Lesotho Held its 106th Meeting Maintained the CBL Rate at 7.75 Per Cent Per Annum.

Central Bank of Lesotho 
2 April 2024 
1. On 2 April 2024, the Monetary Policy Committee (MPC) of the Central Bank of Lesotho  convened its 106th meeting. The Committee deliberated on the latest global, regional, and  domestic economic developments, as well as developments in the financial markets. 
2. The Committee noted that global economic projections were updated in the January 2024  World Economic Outlook. The global economy is anticipated to grow by 3.1 per cent in  2024 and 3.2 per cent in 2025, primarily supported by stronger-than-expected growth in  the United States in the second half of 2023 and robust growth from emerging markets  and developing economies. Despite this resilient yet slow growth, downside risks include  volatility in commodity prices amid geopolitical tensions and weather shocks, faltering  growth in China, and disruptive fiscal consolidations. 
3. Economic activity improved in most selected advanced and emerging market economies  during the last quarter of 2023, supported by strong consumer and government spending,  increased manufacturing activity, a rebound in tourism, and growth in mining and  construction production. However, growth declined in the United Kingdom due to  persistently higher inflation and interest rates, while Japan experienced a slowdown due  to weak domestic demand. 
4. In January 2024, unemployment rates increased in most of the selected economies due to  weak economic growth. However, economies such as the euro area saw a lower  unemployment rate, driven by increased demand for labour in sectors like services and  construction, thanks to a rebound in activity in these sectors. 
5. Inflationary developments were mixed in February 2024. Inflation rates rose in the US,  Japan, China, and South Africa, mainly due to rising costs of energy, food, and shelter.  Nonetheless, inflation rates fell in the UK, euro area, India, and Japan, primarily due to  falling fuel prices, moderated by higher food prices. Consequently, most economies left  policy rates unchanged, except Japan, which ended its negative interest rate policy.
6. Domestic economic activity contracted in January 2024, in contrast to an expansion in the  preceding month, mainly due to weak domestic demand, coupled with declines in  construction, transport, and financial services activity. However, improved activity on the  supply side, especially in the manufacturing sector, moderated the fall. Growth is expected  to pick up in the medium term, mainly underpinned by the construction sector. 
7. Domestic headline inflation fell to 7.3 per cent in February 2024 from 8.2 per cent in the  preceding month, reflecting a slowdown in the prices of food and non-alcoholic beverages,  and alcoholic beverages and tobacco. However, the restaurant and hotels, and transport  categories moderated the decline in inflation. The continued weaker exchange rate  remains the major driver of a higher inflation rate. In the medium term, volatility in  commodity prices as geopolitical tensions escalate and climate shocks are major risks to  the inflation outlook. 
8. Broad money supply declined in January 2024 after an expansion in the preceding month.  The decline reflects the fall in net domestic assets, supported by the rise in government  deposits with the CBL, despite the growth in net foreign assets moderating the fall and the  rise in domestic private sector credit. 
9. Government operations registered a surplus equivalent to 14.1 per cent of GDP in January  2024, mainly due to SACU receipts. During the same period, the stock of public debt as a  per cent of GDP declined to 59.5 per cent. 
10. The CBL’s forecasts indicate a growth uptick in 2024, as the LHWP II reaches its peak over  2024-2025. The increasing construction activity is also expected to have positive spillovers  to support services sector activity. Overall, growth is projected at 3.0 per cent in 2024,  slowing to 1.1 per cent in 2026, as the LHWP II project winds down. 
11. In summary, global growth is expected to pick up in 2024, but risks to the outlook linger in  the medium term. Despite the contraction in January 2024, domestic economic activity is  expected to improve in the medium term. The inflation rate declined, but climate shocks  and a continued weaker exchange rate are expected to influence the inflation outlook. 
12. Having considered the NIR (Net International Reserves) developments and outlook, the  regional inflation and interest rates outlook, domestic economic conditions and the global  economic outlook, the MPC decided to: 
i. Increase the NIR target to US$770 million from US$750 million. At this level, the  NIR target will be sufficient to maintain a one-to-one exchange rate peg between  Loti and the Rand. 
ii. Maintain the CBL rate at 7.75 per cent per annum. 
13. The Committee will continue to closely monitor global economic developments and their  impact on the domestic economy, especially the Net International Reserves and respond  accordingly. 
E M Letete (Ph.D)
Contact Person
Ephraim Moremoholo 
+266 22232094



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