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Lesotho’s inflation slightly up despite fuel, power price hikes

Mpeshe Selebalo


MASERU — Lesotho’s annual inflation rate rose to 3.8 percent in May, a marginal increase of 0.1 percentage point from the figure recorded the previous month, the Bureau of Statistics said last week.

The inflation data released by the Bureau of Statistics on Monday showed that high monthly increases were recorded in price indices for household utilities such as electricity, liquid fuels and vegetables.

The price of electricity, for instance, increased by a massive seven percent while the price of liquid fuels increased by 4.4 percent.

Huge monthly increases were recorded on prices of vegetables including cabbages, spinach, tomatoes and potatoes.

Green peas, dried peas and dried beans were also on the list of products that saw huge monthly price increases, according to the bureau.

The price indices of garments declined by 0.4 percent while those of bread and cereals also decreased by 0.1 percent.

“Declines were observed in price indices of both wheat flours (including bread flour) and maize flour, as well as clothing for women (mainly dresses),” the bureau said.

However, the food inflation rate for May increased marginally by 0.2 percentage point to 3.3 percent, up from 3.1 percent recorded in April.

Lesotho’s inflation rate has hovered between 4.2 in January and 3.7 percent in April.

Economists attribute the decline in the inflation rate to a stabilisation in international food prices.

The Central Bank of Lesotho uses the inflation figures to make decisions whether to increase or reduce the repo rate which is the rate that banks use to borrow money from the central bank and among themselves.

Thabang Mohloki, a market analyst with African Alliance, said they expected Lesotho’s inflation rate to rise in the coming months.

“We still expect Lesotho’s inflation rate to pick up slightly for the remainder of 2010 due to energy tariff increases.

“Furthermore slight increases in inflation would be mainly due to some opportunistic pricing during the World Cup as consumer spending is expected to pick up during this time,” Mohloki said.

He said the low inflation rate will benefit the local economy.

“When inflation is low consumers and business’s are better able to make long-range plans because they know that the purchasing power of their money will hold and will not be steadily eroded year after year,” he said.

He said low inflation also encourages businesses to invest to improve productivity so that they remain competitive and can prosper without having to increase prices.

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