Government operations registered a deficit of 1.7 per cent of Gross Domestic Product (GDP) in May 2024.
This was disclosed at the 108th meeting of the Monetary Policy Committee (MPC) of the Central Bank of Lesotho (CBL) this week.
The governor of the CBL, Dr Maluke Letete, said the deficit was caused of relatively higher government spending.
Letete said during the same period, the stock of public debt as a percentage of GDP declined to 52.4 per cent from a revised 53.0 per cent in the preceeding month.
“Domestic economies activity grew for the second consecutive month in May 2024, registering 1.0 per cent following a 0.9 per cent growth in April 2024.
“This was primarily driven by a stronger performance in the construction and financial services sectors,” he noted.
However, domestic demand and manufacturing sector activity moderated the expansion, Letete indicated.
According to the MPC, in the near term, growth is expected to be stronger mainly due to the Lesotho Highlands Water Project construction activity and its spill over effects on services industries.
The MPC also said the domestic headline inflation rose to 6.5 per cent last month from 6.3 per cent in May 2024. The major contributor to this was food and non-alcoholic beverages prices. Nonetheless, the weaker exchange rate remains challenging to elevated domestic headline inflation.
“Money supply remained unchanged in May 2024 from the preceding month, reflecting the fall in transferable deposits held by other financial corporations, which was met with a commensurate increase in household savings and deposits.
“Despite this, private sector credit grew, supported by ongoing construction activities around the country,” the MPC recorded.
The CBL’s Net International Reserves (NIR) increased approximately US$119.29 million between May 2024 and July 18, 2024. This was mainly due to Southern African Customs Union receipts and increased water royalties during the same period.
The NIR is expected to improve in the next three quarters to March 2025, with cyclical peaks and troughs.
Having considered the NIR developments and outlook, regional inflation and interest rates outlook, domestic economic conditions and the global economic outlook, the MPC decided to maintain at 7.75 percent per annum, while the NIR target floor also remains at $760m, allowing for Loti and Rand to remain at 1 to 1.
