Good news for consumers

Lemohang Rakotsoane

MASERU – CONSUMERS are set to get their buying power back as the inflationary pressures have begun to subside, according to Central Bank of Lesotho (CBL) Governor Retšelisitsoe Matlanyane.

Matlanyane said this at the 61^st Monetary Policy Committee (MPC) meeting in Maseru on Tuesday.

She said although Lesotho’s economy is not doing well at the moment, the abating inflationary pressures will give consumers room to breathe.

“Inflationary pressures are subsiding, mainly due to the easing food and oil prices and the appreciating Loti,” Matlanyane said.

“The year-on-year consumer inflation rate decelerated from 7.5 percent in June to 6.9 percent and 6.6 percent in July and August respectively,” she said.

“Inflation is expected to continue on a downward trajectory for the remainder of 2016 and is expected to average 6.9 percent over the course of 2016.”

Matlanyane further said South Africa had registered a growth of 3.3 percent in the second quarter which is an improvement from the 1.2 percent that was registered in the first quarter.

“It is encouraging to see that things are starting to improve because we know if South Africa improves and registers good growth we will also grow well,” Matlanyane said.

The current account deficit is said to have improved to 8.4 percent of the GDP in the second quarter of 2016, compared to a revised deficit of 14.0 percent in the previous quarter.

“This was driven by a reduction in merchandise trade deficit because of lower merchandise imports and slightly higher merchandise exports,” she said.

“The improvement was also supported by a reduction in payments for services acquired abroad.”

On the other hand the gross official reserves declined by 11.9 percent in the second quarter reflecting a fall in the Southern African Customs Union (SACU) revenue.

Matlanyane stated that despite the sluggish performance of the reserves when measured in months of import cover, “official reserves were recorded at 5.9 months in quarter ending in June compared to 5.2 months recorded in the previous quarter as a result of a fall in imports”.

“At the end of June 2016, government budget is estimated to have registered a deficit of 13.5 percent of GDP from that of 9.5 in March largely driven by the decline in SACU receipts,” Matlanyane said.

Although the inflationary pressures are subsiding, Matlanyane indicated that in the second quarter the economic performance was weak, driven by increasingly fewer sectors.

She added that the economy remains highly exposed to internal and external shocks.

She stated that the quarterly domestic economic activity, measured by the CBL’s Economic Activity Indicator is estimated to have deteriorated in the second quarter of 2016.

“The slowdown emanated from the tertiary and primary sectors. For example, a slowdown was observed in the retail and wholesale sub-sector as well as the mining and quarrying sub-sector” Matlanyane.

After considering all these factors the MPC decided to maintain the CBL rate at 7 percent and increase the Net International Reserves Target floor from US$710 million (approximately M9.9 billion) to US$730 million (about M10.2 billion).