MASERU — Lesotho’s annual inflation rate dropped to 3.4 percent in July down from 3.8 percent the previous month, according to the latest figures released by the Central Bank of Lesotho (CBL).
The bank’s monetary policy committee said in a statement last week that the drop represented 0.4 percentage points from the previous month’s figure.
The committee said the country’s inflation rate was the lowest within the common monetary area.
Lesotho’s inflation rate has been on a gradual slide since January this year with the July inflationa rate being the lowest.
The monetary committee said imported inflation outlook for the country is expected to be low in the coming year based on projections made in South Africa.
Lesotho’s economy is closely linked with that of South Africa as the country imports virtually all it needs from its giant neighbour.
“Annual inflation rate in South Africa was recorded at 3.7 percent, within the three to six percent range persuaded by the South African Reserve Bank. This improved the inflation outlook to 4.8 in 2011,” central bank governor Moeketsi Senaoana said in a statement.
The bank said the country’s current account deficit deteriorated in the first quarter of the 2010/11 financial year which ended in June.
“As envisaged by the committee at its last meeting in August 2010 the current account deficit worsened to 23.8 percent of GDP during the first quarter of the fiscal year 2010/11,” said the bank.
The bank attributed the decline to a sharp drop in Southern African Customs Union (Sacu) non-duty in the current government financial year revenue.
It said non-Sacu receipts fell by more than 50 percent during the quarter that ended in June.
The central bank also announced that it will this year issue treasury bonds from which it hoped to generate about M250 million.
It also said it was yet to achieve its target of US$956 million targeted Net International Reserves (NIR) following the Extended Credit Facility agreement between the government of Lesotho and the International Monetary Fund.
“The committee resolved to undertake monetary policy action to improve the NIR level, which will be assisted by government’s efforts to contain expenditure,” the bank said.
The central bank said government deficit increased by 26 percent in the first quarter of the current 2010/11 financial year with total revenue falling by 17.8 percent.
The decline in revenue was due to a drop in Sacu revenue which according to the bank fell from 60 percent of total government revenue in the first quarter of 2010 to 40.1 percent in the second quarter following the adverse effects of the global financial crisis.