Private sector credit grows by 2.2 percent

Private sector credit grows by 2.2 percent

MASERU – THE Central Bank of Lesotho governor Dr Retšelisitsoe Matlanyane says the private sector credit grew by 2.2 percent in May compared to a negligible increase in April.
“Growth in private sector credit was driven mainly by the credit to business sector which grew by 5.9 percent,” Matlanyane told the Monetary Policy Committee (MPC).
Even though more businesses seem to be getting credit, the economy is still expected to remain sluggish, Matlanyane said.
She also indicated that household credit had maintained a robust upward trend.

The inflation rate has remained subdued since the beginning of the year.
“The rate of inflation, as measured by changes in Consumer Price Index (CPI), increased by 4.0 percent in June compared to 3.8 percent in May,” Matlanyane said.
She said the subdued rate is attributable mainly to the “food and non-alcoholic beverages” component, which accounts for the largest share of the CPI basket.
“There are risks due to expected increase in administered prices and continuing exchange rate depreciation,” she said.

Matlanyane said the domestic macro-economic outlook indicates that real economic activity will recover in the medium-term, driven mainly by good performance in the primary and secondary sectors.

“In particular, the mining sub-sector will register strong growth attributable to commencement of commercial operations reaching full production in some mines.”
She added that the advanced infrastructure works associated with the Lesotho Highlands Water Project (LWHP) Phase II will boost the construction sub-sector, however, the services sector will remain under stress due to weak domestic demand.

The CBL has maintained the CBL rate at 6.5 percent per annum.
Meanwhile, the Net International Reserves (NIR) target floor decreased from US$870 million to US$800 million (about M11.5 billion to M10.5 billion).
“At this level, the NIR position is sufficient to maintain the peg between the Loti and the Rand,” Matlanyane said.

In an interview with thepost after the presentation, the Lesotho Post Bank Managing Director Molefi Leqhaoe said as a bank, they have seen an increase in businesses seeking credit compared to a few months ago. “It has something to do with the fact that the Central Bank of Lesotho reduced its rate.
“As a result, businesses are taking an advantage and taking care of expansions and other developments they wanted to take,” Leqhaoe said.

Lemohang Rakotsoane

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