In­fla­tion drops in Oc­to­ber

Lesotho Times - - Business - Bereng Mpaki

THE Cen­tral Bank of Le­sotho (CBL) says there has been an im­prove­ment in the coun­try’s eco­nomic ac­tiv­ity in the third quar­ter of 2016, char­ac­terised by among other things the de­cel­er­a­tion in the year-on-year con­sumer in­fla­tion rate from 7.5 per­cent in June to 5.7 per­cent in Oc­to­ber.

CBL’S Mone­tary Pol­icy Com­mit­tee (MPC) an­nounced the find­ings this week af­ter its 62nd meet­ing where it also re­solved to re­duce the tar­get floor of the Net in­ter­na­tional Re­serves (NIR) from US$730.00 mil­lion to US$680.00 mil­lion.

The apex bank in­di­cated that the im­prove­ment was in­flu­enced by pos­i­tive per­for­mance from the man­u­fac­tur­ing and fi­nan­cial ser­vices sec­tors.

“Quar­terly do­mes­tic eco­nomic ac­tiv­ity, mea­sured by the CBL’S Eco­nomic Ac­tiv­ity In­di­ca­tor (EAI), is es­ti­mated to have im­proved in the third quar­ter of 2016. The up­turn em­anated from the sec­ondary and ter­tiary sec­tors. Im­prove­ments were ob­served in the man­u­fac­tur­ing, fi­nan­cial ser­vices as well as the government sub­sec­tors,” CBL Gover­nor Dr Retšelisit­soe Mat­lanyane said dur­ing a me­dia brief­ing this week.

“Year-on-year con­sumer in­fla­tion rate de­cel­er­ated from 7.5 per cent in June to 5.7 per cent in Oc­to­ber,” she said, adding, this was “due to the de­cline in food prices both in the re­gion and do­mes­ti­cally”.

She how­ever, noted that “the broad mea­sure of money sup­ply (M2) con­tracted by 5.4 per cent in Septem­ber from 8.3 per cent in June due to a de­crease in Net For­eign As­sets (NFA)”.

Dr Mat­lanyane at­trib­uted the de­cline to the re­call of funds by com­mer­cial banks and the cen­tral bank from abroad.

The CBL chief fur­ther said a slow­down in flows recorded in both pri­mary and sec­ondary in­come ac­counts caused the cur­rent ac­count deficit to widen marginally to 12.6 per cent of GDP in the third quar­ter of 2016, com­pared with a re­vised deficit of 12.4 per cent in the pre­vi­ous quar­ter.

Gross of­fi­cial re­serves de­clined by 8.2 per cent in the third quar­ter. Mea­sured in months of import cover, of­fi­cial re­serves were recorded at 5.3 months in the quar­ter end­ing in Septem­ber com­pared to 5.5 months recorded in the pre­vi­ous quar­ter.

Dr Mat­lanyane said at the end of Septem­ber 2016, government bud­get bal­ance is es­ti­mated to have im­proved to a deficit of 4.6 per cent of GDPDP from that of 13.8 per cent in June une largely due to good per­for­mance nce of non-tax rev­enue.

“In sum­mary,mmary, do­mes­tic eco­nomic per­for­mancer­for­mance dur­ing the third quar­ter arter had im­proved driven byy sec­ondary and ter­tiary sec­tors.ors.

“In­fla­tion­ary onary pres­sures are sub­sid­ing, , mainly due to eas­ing food prices es and the ap­pre­ci­at­ing Loti. How­ever, ever, the econ­omy re­mains highly ex­posed to in­ter­nal and ex­ter­nal shocks. The Com­mit­tee willill con­tinue to mon­i­tor the global and do­mes­tic mes­tic eco­nomic de­vel­op­ments ents closely andd act ac­cord­ingly. ly.

“Hav­ing ng con­sid­ered ed the above ve de­velop- ments, the MPC de­cided to: 1) Re­duce the NIR tar­get floor from US$730.00 mil­lion to US$680.00 mil­lion, 2) Keep the CBL Rate un­changed at 7.00 per cent,” Dr Mat­lanyane said. She also noted that while the global eco­nomic ac­tiv­ity re­mained weak, growth in ad­vanced economies such as Ja­pan, the US and the UK ac­cel­er­ated dur­ing the quar­ter. Dr Mat­lanyane said in Emerg­ing Mar­kets Economies, eco­nomic ac­tiv­ity con­tin­ued to re­main re­silient as well and the “mone­tary pol­icy stance around the globe re­mained ac­com­moda­tive with a view to sup­port growth”.

CBL Gover­nor Dr Retšelisit­soe Mat­lanyane.

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