Moroke Sekoboto
THE Central Bank of Lesotho (CBL)’s Monetary Policy Committee (MPC) has provided relief to consumers by maintaining the repo rate at 6.75 percent.
The decision is aimed at ensuring consistency with prevailing economic conditions and the broader regional monetary environment.
The repo rate is the interest rate at which the central bank lends money to commercial banks, thereby influencing interest rates on loans for vehicles, personal needs, mortgages, and other financial products. A lower repo rate translates into lower borrowing costs for consumers.
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 further reduced the rate to 7.25 percent on 4 February 2025, then to 7 percent on 3 June 2025, before reducing it again to 6.75 percent on 5 August 2025. This latest decision provides additional relief to consumers.
CBL Governor, Maluke Letete, announced the decision following the MPC’s 115th meeting this week. The committee also resolved to maintain the Net International Reserves (NIR) target floor at US$840 million (about M15.2 billion), a level deemed adequate to safeguard the peg between the Loti and the Rand.
Dr Letete said since their last meeting, the International Monetary Fund (IMF) has maintained its global growth projections, signalling resilient economic prospects despite ongoing policy uncertainty. He said these projections were underpinned by stronger-than-expected front-loading of production and exports ahead of anticipated higher US tariffs, as well as improved financial conditions, including a weaker United States dollar that has supported global trade and investment flows.
“In the second quarter of 2025, economic growth remained generally stable across most major economies, driven by robust export performance, increased manufacturing activity, and targeted fiscal stimulus measures, particularly in China.
“Nonetheless, downside risks persist, stemming from persistent geopolitical tensions, potential increases in effective tariff rates, and fiscal vulnerabilities in key economies, which could undermine growth momentum,” Dr Letete said.
In South Africa, he added, economic growth picked up in the second quarter of 2025 following a moderate performance in the first quarter.
“This was driven primarily by a rebound in manufacturing and mining activity alongside stronger household consumption. Inflation eased in August 2025 but is expected to rise in the near term due to persistent administered price pressures. Consequently, the South African Reserve Bank decided to keep the policy rate unchanged, balancing support for growth with the need to monitor emerging inflationary risks.”
Turning to Lesotho, Dr Letete said the preliminary indicator of economic activity showed slight growth in July 2025, reflecting expansion in transport and construction sectors. However, weak domestic demand and a fall in manufacturing—driven by lower U.S. textile exports—constrained growth. In the medium term, growth is expected to moderate due to external shocks, especially from export-oriented industries.
“Headline inflation rose marginally to 4.6 percent in August 2025 from 4.4 percent in July 2025. This mainly reflected an increase in food prices due to the supply constraint of wheat. In the near term, inflation is expected to moderate amid mixed price pressures, but the outlook is balanced,” Dr Letete said.
On the fiscal front, he added that the overall fiscal balance strengthened markedly in July 2025, shifting to a surplus of 11.4 percent of GDP from 0.6 percent in June. This was mainly due to expenditure-driven adjustments despite a sharp decline in revenue excluding SACU receipts.
Meanwhile, the public debt-to-GDP ratio fell to 54.8 percent in May 2025, mainly due to a favourable exchange rate.
In the external sector, the current account recorded a deficit of 4.8 percent of GDP from a surplus in the previous quarter, driven by persistently high import demand relative to exports. Nonetheless, surpluses in the primary and secondary income accounts partially offset the deficit.
Meanwhile, the CBL’s Net International Reserves declined by US$67.39 million, falling from US$1,120.16 million on 22 July 2025 to US$1,052.77 million on 12 September 2025, mainly due to net outflows from commercial banks. At that level, the NIR stood at 25 percent above the required threshold, sufficient to maintain the peg.
“The Committee evaluated the risks to growth and inflation, the regional monetary policy stance, and the imperative of maintaining the credibility of the Loti-Rand peg. The CBL will ensure adequate foreign exchange reserves to uphold the peg and keep domestic inflation broadly aligned with South Africa’s. The Bank will maintain close monitoring of domestic and external developments, including inflation trends, fiscal dynamics, SACU receipts, and the policy direction in South Africa,” Dr Letete said.
