The Monetary Policy Committee has warned of risks ahead in the domestic economic outlook while the country is facing a number of challenges in the coming financial year - ranging from the slowing down global economic growth to dwindling domestic output, declining jobs as well as price increases in the months ahead.

“Lesotho’s fixed exchange rate system under the Common Monetary Area (CMA) requires a healthy fiscal position to support maintenance of the exchange rate parity,” the Central Bank of Lesotho Governor said in a statement on Monday this week. The MPC reported that the annual inflation rate, as measured by the change in the consumer price index (CPI) for all items, remained unchanged at 5.0 percent between January and February 2019, adding that higher price increases in February than in January were observed in the “food and non-alcoholic beverages”, “clothing and footwear” and “transport” while the rest of the categories were moderate.

“While the Loti displayed mixed performance against the major currencies during the review period, the exchange rate is expected to continue posing upside risks to the inflation outlook,” the MPC statement added. Despite the red flag warning, the MPC has, however, reported some positives on the domestic economy front, saying economic activity increased in January 2019 relative to the previous month.