ALTHOUGH local inflationary pressures may have subsided in April of this year, domestic food prices continued to rise as a result of persistently high imported inflation supported by the lower rand.
May 31, 2023
2 min read
Food prices remain high despite declining inflationary pressures
CBL Governor, Dr Maluke Letete
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The weak loti continues to increase the hazards. During its quarterly announcement of the Statement of the Monetary Policy Committee (MPC) this week, the Central Bank of Lesotho (CBL) reported that April's inflation rate was 6.7% as opposed to 6.8% in March.
On the other hand, the adoption of the alcohol and cigarette tax reduced the deflation.
The CBL also disclosed that while the stock of public debt is anticipated to have decreased from 54.4 percent of GDP in the previous quarter to 53.5 percent of GDP in the first quarter of 2023, the textile and apparel manufacturing subsectors have stagnated as some businesses have closed, and other industries such as transportation and construction have also performed poorly.
The Lesotho Highlands Water Project Phase II (LHWP II) construction activities are anticipated to improve the economy's short-term outlook.
The MPC agreed to change the NIR target floor to USD 690 million after taking into account the NIR trends and outlook, regional inflation and interest rate prognosis, local economic conditions, and global economic perspective.
A one-to-one exchange rate peg between the loti and the rand will be maintained at this level, according to NIR goal, CBL Governor, Dr. Maluke Letete announced this week.
The CBL rate was also raised by 25 basis points, moving from 7.50 percent to 7.75 percent annually.
“The committee will continue to closely assess the global economic developments and their impact on the domestic economy especially the Net International Reserves and respond accordingly,” Letete added.
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Increases in credit given to both enterprises and families have inflated private sector credit while the current account balance improved in the first quarter of 2023. Current account deficit decreased from 13.6 percent of GDP in the fourth quarter of 2022 to 12.4 percent.
Due to increased surpluses on the primary and secondary revenue accounts, the deficit was substantially smaller.
In comparison to the 4.6 months recorded in the prior quarter, the stock of reserves, expressed as months of imports, decreased to 4.2 months in the first quarter of 2023.
Compared to a surplus reported in the quarter before, the government's budget balance declined in the final quarter of the 2022–23 fiscal year.
According to estimates, the fiscal balance saw a deficit of 13.3% of GDP in the most recent quarter, as opposed to a surplus of 3.0%.