Moroke Sekoboto
THE Central Bank of Lesotho (CBL)’s Monetary Policy Committee (MPC) has once again provided relief to consumers by reducing the repo rate by 25 basis points, from 6.75 percent to 6.50 percent.
Announcing the decision after the MPC’s 116th meeting this week, CBL Governor, Dr Maluke Letete, said the move aligns with the prevailing domestic economic conditions and broader regional monetary developments.
The repo rate is the interest rate at which the central bank lends to commercial banks which, in turn, influences the cost of loans such as mortgages, personal loans and vehicle finance to consumers.
A lower repo rate generally translates into reduced borrowing costs for consumers and businesses.
The latest reduction continues an easing cycle that began in late 2024. The CBL had maintained the repo rate at 7.75 percent from May 2023 until November 2024, before trimming it to 7.50 percent. It was subsequently lowered to 7.25 percent on 4 February 2025, then to 7 percent on 3 June 2025, and further to 6.75 percent on 23 September.
The fresh cut to 6.50 percent extends this gradual easing.
As part of its policy measures, the MPC also adjusted the Net International Reserves (NIR) target floor from US$830 million to US$840 million (just over M14 billion). Dr Letete said this adjustment supports the sustainability of the one-to-one peg between the loti and the South African rand and keeps monetary conditions closely aligned with those in South Africa.
Dr Letete said the IMF projected global activity to moderate in 2025, with advanced economies remaining subdued and emerging markets expanding at a slower pace.
“Inflation generally eased across major economies, though it remains elevated in selected regions. Risks to the outlook include trade tensions, labour supply shocks, financial and fiscal vulnerabilities, the repricing of technology assets and rising commodity prices,” Dr Letete said.
He further noted that economic developments show mixed outcomes across selected countries in the third quarter of 2025.
“Trade tensions and policy uncertainty weighed on exports, hitting export-dependent economies hardest, while advanced economies showed pockets of resilience supported by domestic demand and technology investment.
“Meanwhile, some emerging markets continued to drive overall growth, supported by strong domestic consumption and infrastructure investment.”
According to Dr Letete, inflation rates diverged across selected economies.
“Energy and transport costs pushed prices higher in some economies, while in others easing goods and services prices moderated inflation. As a result, most major central banks held policy rates steady, reflecting caution amid moderating inflation and uneven growth.
“In the region, recent data indicates that South Africa’s growth improved in the third quarter of 2025, mainly supported by household spending, although investment remained weak.
“While South Africa’s inflation rate rose to 3.6 percent in October 2025, the outlook remains positive, supported by stabilising food prices, declining oil prices and a stronger rand. As a result, the South African Reserve Bank reduced the policy rate by 25 basis points to 6.75 percent per annum.”
Dr Letete said the mixed global outlook continues to present both risks and opportunities. He emphasised again that inflation generally eased across major economies but remains elevated in selected regions, and that global risks include trade tensions, labour supply shocks, financial and fiscal vulnerabilities, asset repricing and rising commodity prices.
He also said economic developments show mixed outcomes across selected countries in the third quarter of 2025, with trade tensions and policy uncertainty weighing on exports, especially for export-dependent economies.
At the same time, some advanced economies demonstrated resilience, driven by domestic demand and investment in technology. Emerging markets continued to bolster overall global growth through strong domestic consumption and infrastructure investment.
On the domestic front, Dr Letete said economic activity slowed down in the third quarter of 2025.
“This was mainly underpinned by weak manufacturing and domestic demand, particularly private spending. Looking ahead, growth is expected to be modest over the medium term due to weaker exports and mining output, but partially offset by the expected stronger textile exports to South Africa,” he said.
He further stated that domestic headline inflation moderated to 4.5 percent in October 2025 from 4.7 percent the preceding month.
“This was mainly due to lower food prices reflecting increased supply of vegetables, lower fuel prices and a stronger rand. In the medium term, inflation is expected to remain moderately higher if food prices remain persistently elevated.”
Moreover, the overall fiscal balance remained relatively stable with a surplus of 10.0 percent of GDP.
“This was mainly supported by water royalties amid accelerated infrastructure development. Public debt as a percent of GDP continued to decline, reflecting timely repayments and the favourable exchange rate, which together reinforce fiscal sustainability and support domestic liquidity under the peg,” Dr Letete said.
The current account deficit moderated in the third quarter, mainly due to stronger exports. SACU receipts and investment income from abroad continued to be critical buffers despite the persistent trade account deficit.
Meanwhile, CBL’s Net International Reserves increased between 12 September and 14 November 2025 by US$60.78 million, putting reserves comfortably above the current NIR target floor.
Dr Letete said the committee carefully assessed the risks to economic growth and inflation, the prevailing regional monetary policy stance, and the overriding importance of preserving full credibility of the loti–rand peg.
