Metro Rate Cards

CBL maintains repo rate at 3.50%

CBL Governor, Dr Retšelisitsoe Matlanyane

May 26, 2021 3 min read

3 min read

THE Central Bank of Lesotho (CBL) has decided to keep the repo rate unchanged, at 3.50 percent. Set at this level, the rate will ensure that the domestic cost of funds remains aligned with the rest of the region.

The repo rate determines the interest rate at which the Central Bank lends money to commercial banks, which then affects the rate at which they lend money to consumers.

On Monday, the bank announced that the rate of inflation, as measured by the year on year percentage change in consumer price index (CPI), was 6.7 percent in April, compared to 6.5 percent in March the same year.

The upsurge emanated from both food and non-food components of the CPI basket.

“The domestic economic recovery remains largely conditional on developments related to potentially stronger and prolonged rise in virus infections, COVID-19 containment measures and the rollout of vaccines,” the CBL governor, Dr Retšelisitsoe Matlanyane said on Monday when presenting the statement of the Monetary Policy Committee (MPC).

MPC is committed to conducting monetary policy with the sole purpose of maintenance of macroeconomic stability.

During its meetings, the committee considers international, regional and domestic economic developments as well as financial market conditions.

The governor further revealed that the broad measure of money supply (M2) declined by 1.3 percent in the first quarter of 2021, from an increase of 9.9 percent in the previous quarter.

The decrease, she said, was due to a 4 percent growth in total banking sector net domestic assets, which was moderated by 0.8 percent rise in the sector’s net foreign assts.

“Private sector credit extended and banks fell by 0.1 percent in quarter one, after contracting by 0.5 percent in the fourth quarter of 2020. Loans and advances extended to business enterprises increased by 1.1 percent in quarter one, compared to a 3.1 percent decline realised in the fourth quarter of 2020,” Dr Matlanyane said.

Conversely, total credit granted to households fell by 0.5 percent in quarter one, relative to an increase of 0.5 percent in the quarter ending December 2020.

The current account recorded a surplus equivalent to 1.1 percent of GDP in the first quarter of 2021, from a deficit of 1.8 percent of GDP in the preceding quarter.

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The improvement in the current account was driven mainly by the performance of the trade and income accounts.

Consequently, the gross international reserves, as measured in months of import cover, rose to 4.5 months in the first quarter of 2021, compared to 4.3 months in the previous quarter.

The government budgetary operations on the other hand recorded a fiscal deficit equivalent to 9 percent of GDP during the first quarter of 2021, as opposed to a revised fiscal surplus of 12.9 percent of GDP in the last quarter of 2020.

The MPC further decided to increase the NIR target floor from US$720 million to US$800 million. The new NIR target will be consistent with the maintenance of the exchange rate between the loti and the South African rand.




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