Monetary Policy Committee (MPC) Statement of the 25th March, 2025

1. The Monetary Policy Committee (MPC) of the Central Bank of Lesotho (CBL) held its 112th meeting on 25th March 2025. The Committee assessed recent developments in global, regional, and domestic economies, as well as financial market trends, to guide its policy decisions.
2. Economic activity generally improved in selected economies in the fourth quarter of 2024, mainly due to strong consumer demand despite trade challenges. While most economies are expected to grow in the first quarter of 2025, the United States (US), the United Kingdom (UK), and the euro area are projected to experience slower growth. The anticipated impact of tariffs on the US economy and policy uncertainty in the euro area is likely to dampen growth and exert inflationary pressure. Nonetheless, Japan, China, India, and South Africa (SA) are demonstrating stronger growth prospects, supported by robust consumer demand in Japan, a stimulus package in China, and strong manufacturing sector performance in India and SA. However, these growth prospects are unfolding amid global trade and policy uncertainties.
3. Although the International Monetary Fund’s (IMF’s) global growth projections have not changed since the January 2025 World Economic Outlook (WEO) update, global uncertainty has heightened due to escalating trade tensions and recurring geopolitical conflicts. The US economy is projected to expand in 2025, while Europe is expected to stagnate. Nonetheless, Germany’s infrastructure investment programme is expected to boost growth in the near term. Key risks to global growth include inflationary pressures, commodity price volatility, and intensifying trade tensions.
4. Labour market conditions varied across major economies in early 2025. In the US, the unemployment rate remained relatively stable, supported by job gains in key sectors. In contrast, the euro area recorded a decline in unemployment, although youth unemployment remained a concern. In Japan and China, unemployment rates rose, primarily due to structural changes, while the UK’s rate held steady despite higher national insurance contributions.
5. Inflation continued its downward trend in February 2025 across several major economies. In the US and the euro area, this decline was primarily driven by falling energy and services costs. Similarly, in Japan, government subsidies helped ease inflationary pressures as early as January 2025. However, inflation in the UK and SA increased, mainly due to rising energy, utility, and housing costs. In response, most central banks held their policy rates steady, except in the euro area and India, where rates were lowered. Consequently, both short-term and long-term yields declined as central banks maintained rates and inflationary pressures eased.
6. Domestic economic activity contracted by 4.5 per cent in January 2025, reversing the expansion recorded in the previous month. The contraction was broad based, primarily driven by weak domestic demand and reduced activity in the manufacturing, construction, and transport services industries. While growth projections have remained largely unchanged since the last meeting of the MPC, rising global uncertainty and domestic vulnerabilities – particularly related to trade and development agreements – pose downside risks to the outlook. Growth is projected to moderate to 2.1 per cent in 2025.
7. Domestic inflation rose to 4.1 per cent in February from 3.6 per cent in January 2025. This was due to price increases in Food and Non-Alcoholic Beverages, Housing, Electricity, Gas, and Other Fuels, and Transportation. The rise in food prices was mainly driven by supply-side constraints amid a sharp increase in demand for white maize. In the near term, inflation is expected to remain moderate at 5.2 per cent in 2025, reflecting modest pressures from non-food inflation, although upside risks persist.
8. Broad money supply contracted by 2.5 per cent in January 2025, reversing the 2.4 per cent increase recorded in December 2024. This decline was mainly due to a fall in transferable deposits held by the business sector, reflecting weaker economic activity and lower consumer spending. However, private sector credit expanded, mainly driven by increased lending to business enterprises, while household loans declined.
9. Government budgetary operations recorded an estimated surplus of 22.1 per cent of GDP in January 2025, contrasting with the 0.3 per cent deficit recorded in December 2024. This surplus was primarily driven by Southern African Customs Union (SACU) revenue, which led to total revenue growing faster than expenditure. Meanwhile, the public debt stock as a percentage of GDP declined to 58.0 per cent from the revised 58.4 per cent in the previous month, mainly due to exchange rate gains.
10. The CBL’s Net International Reserves (NIR) fell by approximately US$105.2 million to US$998.9 million as of 13th March 2025, from US$1,104.2 million on 23rd January 2025. This decline was mainly driven by net outflows from commercial banks. In the near to medium term, the NIR position is projected to improve.
11. In summary, despite heightened global uncertainty, global economic activity is expected to remain resilient. Domestically, economic growth is projected to be modest amid rising uncertainties and vulnerabilities.
12. In light of the above developments, the MPC decided to:
    i. Maintain NIR target floor at US$840 million to ensure sufficient reserves for sustaining the one-to-one
    peg between the loti and the rand.
    ii. Keep the CBL rate at 7.25 per cent per annum to align with prevailing domestic and regional economic conditions.
13. The Committee will continue to monitor global economic developments and their impact on the domestic economy, with a particular focus on the NIR and will respond as necessary.
    P. L. Mohapi
    FIRST DEPUTY GOVERNOR
    Contact Person:
    Ephraim Moremoholo
    +266 22232094 emoremoholo@centralbank.org.ls

LITLHA-KHOLO TSA POLELO EA KOMITI E PHETHAHATSANG LEANO LA LICHELETE (MONETARY POLICY COMMITTEE)
KA: MR. POWELL LEHLOMELA MOHAPI – LA 25 TLHAKUBELE, 2025

1. Komiti e Phethahatsang Leano la Lichelete ea Banka e Kholo ea Lesotho (MPC), e ile ea tšoara kopano ea eona ea lekholo le leshome le metso e ’meli (112th) ka la mashome a mabeli a metso e mehlano, Tlhakubele, monongoaha.
   Komiti e ile ea hlahloba maemo a moruo oa lefatše, oa linaha tseo Lesotho le nang le khoebisoano le tsona, oa naha, ekasitana le maemo a mebaraka ea lichelete lefatšeng ka bophara. Sena se etsoa ele ho ananela khahlamelo ea linaha tseo moruong oa naha ea Lesotho. Boithuto bona ba moruo bo etsoa molemong oa hore komiti e tsebe ho ikeletsa lintlheng tsa maano.
   Ka kakaretso, moruo oa lefatše o ile oa ntlafala likhoeling tse tharo tsa ho qetela tsa selemo, ngoahola. Sena se bakiloe ke tlhoko e phahameng ea thepa hotsoa ho baji, ntle le liqholotso tsa khoebisano. Leha likhakanyo tsa moruo li lepa kholo moruong oa linaha tse mmaloa lefatšeng likhoeling tse tharo tse qalang selemo sa 2025, US, UK, le linaha tsa selekane tsa Europe ha lia lebelloa ho hola haholo ka lebaka la ho hlokahala ha botsitso ha maano tikolohong ea Europe, ho kannang ha ama kholo ea moruo kapa le hona ho nyolla litjeo tsa thepa. Haele linaheng tsa Japan, China, India, le Afrika Boroa, moruo o lebeletsoe ho ntlafala. Ka ho otloloha, tlhahiso e phahameng ka hare ho naha ea Afrika Boroa, e lebeletsoe ho ba le khahlamelo e kholo moruong.
2. Kholo ea Moruo ka hara Naha
   Moruo oa Lesotho ha re o sheba khoeli ka khoeli, lipakeng tsa Pherekhong, monongoaha, le Tsitoe ngoahola, o theohile ka 4.5%. Sesosa ebile tlhoko e tlase ea thepa, tlhahiso e tlase lifemeng tse kholo, kaho (construction), le lipalangoang (transport services).
3. Tśebeliso ea lichelete
   Tsébelitso ea lichelete tsa ‘muso, e nyolohile ka linoko tse 22.1% lekholong papisong le (GDP) ka Pherekhong, monongoaha ka lebaka la lekeno la SACU. Nakong e tšoanang, mekitlane ea sechaba se ile sa theohela ho linoko tse 58.0 lekholong ho tloha ho linoko tse 58.4% ka Hlakola, Monongoaha.
4. Litjeo(Inflation)
5. Ka mor’a boithuto bona, komiti e fihletse liqeto tse latelang:
   Taba e e bolelang ho Mosotho?
   ∙Tebello ke hore tsoala e lefuoang mekolotong e tla sala e sa fetoha.
   ∙ Ho libanka tebello ke hore sekhahla sa tsoala seo li fanang ka sona bakeng sa li polokelo (deposits), le
   eo li e lefisang haena ho fetoha.
   P. L. Mohapi
   FIRST DEPUTY GOVERNOR
   Contact Person:
   Ephraim Moremoholo
   +266 22232094emoremoholo@centralbank.org.ls