Moroke Sekoboto
THE Central Bank of Lesotho (CBL) has kept its repo rate unchanged at 6.75 percent, providing relief to consumers and businesses by leaving borrowing costs unchanged despite growing global economic uncertainty.
The decision was announced by the CBL’s Monetary Policy Committee (MPC) at its 120th meeting held on Friday at the Lehakoe Cultural and Recreation Centre.
The repo rate is the interest rate at which the central bank lends money to commercial banks. It influences the interest rates banks charge on loans for vehicles, mortgages, personal loans and other credit facilities. A lower repo rate generally translates into cheaper borrowing costs for consumers.
CBL had previously raised the repo rate by 25 basis points from 6.5 percent to 6.75 percent on 29 May 2026.
Announcing the committee’s decision on Friday, CBL Governor, Dr Maluke Letete, said the MPC had considered both global and domestic economic developments before deciding to maintain the policy rate.
Dr Letete said the country’s Net International Reserves (NIR) stood at US$1.353 billion (M22.7 billion) as of 16 July 2026, equivalent to 5.4 months of import cover.
According to Dr Letete, this level of reserves remained sufficient to safeguard the Loti’s peg to the South African rand against potential external shocks.
He, however, said reserves were expected to decline gradually as higher global oil prices increased the country’s import bill, with reserves projected to fall to US$1.217 billion (M20.4 billion) by March 2027.
“The global environment remains uncertain. Supply-side disruptions due to the conflict in the Middle East have pushed energy prices sharply higher. The June ceasefire talks brought temporary relief. The conflict has since resumed, and the outlook for energy prices is correspondingly less secure,” Dr Letete said.
“While global growth is expected to slow, investment in artificial intelligence is expected to provide some boost. However, further escalation of the conflict, trade fragmentation and a strong El Niño remain downside risks. The impact of the energy shock has been uneven, falling most heavily on commodity-importing low-income countries and emerging market economies.”
Dr Letete said global headline inflation was expected to increase in 2026 before easing in 2027, largely due to rising energy and fertiliser prices. As a result, most central banks have opted to keep their policy rates unchanged.
He noted that rising fuel prices had also pushed inflation higher in South Africa, prompting the South African Reserve Bank (SARB) to maintain its policy rate at 7.0 percent.
Turning to the domestic economy, Dr Letete said economic activity had weakened after a modest rebound earlier in the year.
“Recent indicators point to subdued demand and weak activity in the transport and manufacturing subsectors.
“Medium-term growth is expected to remain modest, anchored by the services sector. Credit to the private sector registered weak growth and is expected to remain broadly in line with the medium-term outlook,” he said.
Dr Letete said domestic inflation had edged higher, driven mainly by rising transport costs, while food prices had remained relatively stable.
“The medium-term outlook was revised marginally upwards, though risks remain tilted to the upside. Threats to the inflation outlook are expected to come from higher oil prices, the possible withdrawal of relief on the fuel levy, weather-related disruptions to food supply, and second-round pass-through into wages and other prices.”
He said the MPC would continue monitoring inflationary pressures closely and stood ready to adjust monetary policy if necessary.
“The Committee will monitor evidence of second-round effects and stands ready to act decisively to defend the peg and preserve macroeconomic stability,” Dr Letete said.
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