The government operations are reported to have registered a deficit of 1.7 percent on the Gross Domestic Product (GDP) in May, 2024, which is explained to be because of relatively higher government spending.
This was said by the Governor of the Central Bank of Lesotho Dr. Maluke Letete at the media briefing aimed at tabling the statement of the deliberations of the Monetary Policy Committee meeting which was held on Tuesday.
Speaking at this briefing Dr. Letete said that the committee held its 108th meeting where it deliberated on the latest global, regional and domestic economic developments as well as the developments in the financial markets and have also noted that the July 2024 International Monetary Fund (IMF) growth projections for the global economy were relatively unchanged from the April 2024 projections.
He indicated that the global economy is forecast to grow by 3.2 percent in 2024 with a slight upward revision to 3.3 percent in 2025 and this is expected to be largely unpinned by strong growth from emerging markets and developing economies such as India and China.
Dr. Letete further mentioned that domestic economic activity grew for the second consecutive month in May 2024 registering 1.0 Percent following a 0.9 percent growth in April 2024 and this was primarily driven by a stronger performance in the construction and financial services sectors adding that domestic demand manufacturing sector activity moderated expansion therefore in the near term growth is expected to be stronger mainly due to the Lesotho Highlands Water Project construction activity and its spillover effects on services.
Moreover, Dr. Letete highlighted that the Central of Lesotho’s Net International Reserves (NIR) increased by approximately $119.29 million between May and July, 18th this year due to the SACU receipts and increased water royalties during the same period showing that the NIR is expected to improve in the next three quarters to May, 2025 with cyclical peaks and troughs.
Meanwhile, Dr. Letete mentioned that the domestic headline inflation rate is reported to have risen to 6.5 percent in June 2024 from 6.3 percent which was reported for the month of May.
Having considered the Net International Reserves (NIR) developments and outlook regional inflation and interest rates outlook, domestic economic conditions and global economic outlook, Dr Letete delineated that the Monetary Policy Committee has decided to maintain the NIR target floor at $760 million as at this level, the NIR target will be sufficient to maintain a one-to-one exchange rate peg between the Loti and the Rand.
He also stated that the committee has decided to maintain the CBL rate unchanged at 7.75 percent per annum adding that the committee will continue to closely assess the global economic development and their impact on the domestic economy, especially the net international reserves and respond accordingly.
According to the World Economic Outlook by the International Monetary Fund (IMF) Global growth is projected to be in line with the April 2024 World Economic Outlook (WEO) forecast, at 3.2 percent in 2024 and 3.3 percent in 2025.
Source: Lesotho News Agency (LENA) 24/7/2024
