CBL maintains repo rate at 6.5

Moroke Sekoboto

THE Central Bank of Lesotho’s (CBL) Monetary Policy Committee (MPC) has maintained the repo rate at 6.5 percent, a move that offers continued relief to consumers and businesses amid easing inflation and improving global growth prospects.

The decision aligns with revised global growth projections, which have been adjusted slightly upward since the previous MPC meeting.

The repo rate is the interest rate at which the central bank lends to commercial banks and directly influences borrowing costs for consumers on products such as vehicle loans, personal loans and mortgages. A lower repo rate generally translates into reduced borrowing costs.

The CBL had held the repo rate at 7.75 percent from May 2023 until November 2024, when it cut it to 7.5 percent. Further reductions followed — to 7.25 percent on 4 February 2025, 7 percent on 3 June 2025, and 6.75 percent on 23 September 2025 — before it was lowered to 6.5 percent on 25 November 2025.

CBL Governor, Dr Maluke Letete, announced the latest decision following the MPC’s 117th meeting on Friday.

As part of its policy actions, the MPC also resolved to revise the Net International Reserves (NIR) target floor to US$860 million from US$830 million, a level deemed adequate to underwrite the loti–rand peg.

Dr Letete said the International Monetary Fund (IMF) projects global growth to remain resilient, supported by surging technology investment in North America and Asia, as well as fiscal and monetary support and favourable financial conditions, which have helped offset trade policy headwinds. Global inflation is also expected to moderate further.

However, he cautioned that risks to growth remain.

“Risks could emanate from escalating trade tensions, domestic or geopolitical disruptions, and elevated public debt or large fiscal deficits that could adversely affect financial conditions,” Dr Letete said.

He said by the end of 2025, global labour markets showed mixed trends. Unemployment moderated in the United States, the Euro area, Russia and Brazil, supported mainly by job gains in key sectors. Unemployment rates remained broadly stable in Japan, the United Kingdom and China due to structural labour factors, while India recorded a slight increase driven by higher labour force participation.

Inflation trends also differed across major economies.

“Lower energy costs kept prices steady in the US, while moderating services inflation offset rising food and alcohol costs in the euro area. Energy and transport costs pushed prices higher in some economies, while easing goods and services prices moderated inflation in others. Against this backdrop, major central banks eased policy rates.”

At the regional level, he said signs of recovery were emerging in South Africa, particularly in the last quarter of 2025. South Africa’s composite coincident business cycle indicator rose by 0.3 percent in October 2025, reflecting modest gains in industrial production and trade and signalling a gradual strengthening in current economic activity.

“Prices continued to ease, aided by a stronger rand and lower oil prices, with transportation and recreation costs declining despite rising meat prices following a foot-and-mouth outbreak. As a result, the South African Reserve Bank (SARB) maintained its policy rate at 6.75 percent,” Dr Letete added.

Turning to domestic developments, Dr Letete said the latest data show a rebound in economic activity from October to November 2025, driven mainly by strong domestic demand and improved performance in the financial sector. This was reflected in higher private sector credit and increased imports of consumer goods and construction materials.

However, this growth was partly offset by contractions in the manufacturing and transport subsectors, largely due to weak textile exports to the United States and lower fuel consumption.

Looking ahead, Dr Letete projected modest economic growth, supported by the renewal of the African Growth and Opportunity Act (AGOA) and higher Southern African Customs Union (SACU) revenues, although risks from trade uncertainty persist.

He said inflation eased to 4.1 percent in December 2025 from 4.3 percent in November, mainly due to lower food and fuel prices supported by a stronger exchange rate. In the medium term, inflation is expected to remain elevated at 4.7 percent.

On the fiscal front, Dr Letete said the overall fiscal balance recorded a deficit of 4.5 percent of Gross Domestic Product (GDP) in November 2025, driven by weak revenue collection and elevated expenditure. The deficit was financed mainly through a drawdown of government deposits. Public debt declined to 53.9 percent of GDP, largely due to favourable exchange rate movements that reduced the domestic currency value of external debt.

He further revealed that CBL’s NIR increased by approximately US$108.73 million to US$1.22 billion as at 21 January 2026, from US$1.11 billion recorded on 14 November 2025. The increase was mainly due to the inflow of SACU receipts in January 2026.

“At this level, the NIR remains comfortably above the previous target floor of US$830 million, providing a strong buffer against external shocks,” Dr Letete said.

He reaffirmed the CBL’s commitment to maintaining sufficient NIR to support the loti–rand peg, aligning domestic inflation with that of South Africa, and remaining ready to respond to global and regional developments.

“The Committee carefully assessed risks to economic growth and inflation, took into account the prevailing regional monetary policy stance, and reaffirmed the critical importance of preserving the full credibility of the loti–rand peg.”