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NOVEMBER 24, 2011
1.
Introduction
At its 35th
meeting of 24 November, 2011, the Monetary Policy Committee (MPC)
of the Central Bank of Lesotho (CBL) resolved to leave the Net
International Reserves (NIR) target for the quarter ending in
December 2011 unchanged at USD825.0 million. In making this
decision, the MPC had considered recent economic developments
and CBL’s monetary policy operations to ensure that the Bank
continues to achieve its price stability mandate. This level of
reserves is considered sufficient to support the exchange rate
parity between the loti and the South African (SA) rand. It
would also allow the country to meet the requirements of the
Extended Credit Facility (ECF) arrangement between the
Government of Lesotho and the International Monetary Fund (IMF).
2.
Inflation Developments
Consumer
price inflation,
measured by change in the consumer price index (CPI),
rose to an
annual rate of 6.2 per cent
during the month of October from
5.5 per cent in
September,
2011.
The main contributors to the September inflation were prices of
electricity, gas and other fuels; personal transport and food
and non alcoholic beverages,
which
contributed 23.0 per cent, 9.5 per cent, and
9.1 per cent, respectively to consumer price inflation.
At 6.2 per
cent, Lesotho’s rate of inflation was higher than that of South
Africa, which had risen from 5.7 per cent in September to 6.0
per cent in October, 2011. Price developments in Lesotho are
expected to continue evolving in line with those in South
Africa. Inflationary expectations have risen somewhat in South
Africa in line with international price developments. At 6.0 per
cent, headline CPI in South Africa has reached the upper limit
of the 3 to 6 per cent target range. It is expected to breach
the upper limit by the end of 2011 and start falling gradually
after the first quarter of 2012, returning to the target range
by the end of 2012.
3.
Balance of Payments
Lesotho’s balance of payments position improved substantially
during
the quarter ending in September, 2011. The current account
balance shifted from a deficit of 18.7 per cent of GDP, in the
last quarter, to a surplus equivalent to 10.5 per cent of GDP.
This was a result of a higher growth in exports and net income
from abroad, as well as reduced payments for services abroad.
The level of gross official reserves also increased from 4.1
months of import cover, at the end of the last quarter, to 4.9
months at the end of September, 2011.
4.
Fiscal
Performance
The fiscal position for the quarter ending in September 2011
reflected a non-cumulative fiscal deficit equivalent to 12.1 per
cent of GDP. This was due to a large quarterly increase in
total public expenditure which surpassed revenue growth
considerably.
5.
Monetary Policy Stance
The MPC kept the NIR target for the quarter ending in December
2011 at USD825 million. The target continues to be consistent
with both the ECF program commitments and the maintenance of the
exchange rate peg between the loti and the SA rand. The MPC will
continue to monitor domestic and international developments, and
to undertake appropriate policy measures to ensure that the NIR
target for December 2011 is achieved.
A. R. Matlanyane (PhD)
Acting
GOVERNOR
November 24, 2011
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