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 7 percent to 6.75 percent.
The decision aligns with the prevailing monetary policy stance and reflects current domestic economic conditions as well as broader regional monetary dynamics.
The repo rate is the interest rate at which the central bank lends to commercial banks, thereby influencing the cost of borrowing for consumers on products such as vehicle loans, personal loans, and mortgages.
A lower repo rate generally leads to reduced borrowing costs.
The CBL had maintained the repo rate at 7.75 percent from May 2023 until November 2024, when it reduced it to 7.5 percent. It was further lowered to 7.25 percent on 4 February 2025, then to 7 percent on 3 June 2025, and now to 6.75 percent, offering further relief to consumers and businesses.
CBL Governor, Maluke Letete, announced the decision following the MPC’s 114th meeting this week.
As part of its policy actions, the MPC also resolved to adjust the Net International Reserves (NIR) target floor from US$830 million to US$840 million (just over M14 billion) to support the sustainability of the one-to-one peg between the loti and the South African rand.
Dr Letete explained that the adjustment helps ensure the sustainability of the one-to-one peg between the Loti and the South African rand.
He said the global economic outlook remains mixed.
“While uncertainty persists due to trade disruptions and geopolitical risks, the International Monetary Fund (IMF) has revised its global growth forecast for 2025 upward to three percent, reflecting stronger-than-expected trade and fiscal support,” Dr Letete said.
“In South Africa, economic activity is expected to pick in the second quarter of 2025 from a weak growth of 0.1 percent in the first quarter. Inflation remained within the South African Reserve Bank’s (SARB) target range, promoting a policy rate cut,” Dr Letete said.
According to Dr Letete, Lesotho’s economy showed modest recovery in May, driven by improved private consumption and resilient manufacturing in the first half of the year, particularly textile exports to South Africa.
However, the recovery remains fragile, with downside risks including weakening external demand, higher trade costs, withdrawal of donor-funded programmes such as Compact II, and ongoing challenges in the mining sector.
On the domestic front, Dr Letete said inflation in Lesotho eased to 4.3 percent in June 2025, owing to lower international oil prices and an appreciation of the Loti against the US Dollar.
Although inflation is expected to remain contained in the near term, risks remain from imported inflation, particularly from South Africa,
On the fiscal front, he added that the government recorded a deficit of 4.4 percent of GDP in May 2025.
“Revenue, excluding SACU receipts, remained stable, while expenditure contracted due to a decline in grants to extra-budgetary entities, in addition to reduced spending on capital investment.”
Meanwhile, the external sector improved, with a rise in textile exports and SACU receipts boosting NIR by US$50.95 to US$1,120.16 million as of 22 July 2025.
The committee also assessed risks to growth and inflation, the regional monetary policy stance, and the need to preserve the credibility of Lesotho’s exchange rate peg.
The CBL will maintain adequate foreign exchange reserves to sustain the loti-rand parity and keep domestic inflation broadly aligned with South Africa’s.
“To anchor inflation expectations and foster macroeconomic stability, the CBL is committed to achieving and maintaining parity between the loti and rand by keeping adequate reserves.
“In the context, the recent easing of the SARB’s policy rate, alongside contained domestic inflation, provides a narrow window to reduce the CBL policy rate without materially increasing the risk of external imbalances,” Dr Letete said.
He said the CBL would continue to monitor domestic and external developments, including inflation trends, fiscal dynamics, SACU revenues, and South Africa’s policy direction.
