The Central Bank of Lesotho’s (CBL’s) Monetary Policy Committee (MPC) has an- nounced at its 91st meeting on Sep- tember 28 that Lesotho received the special drawing rights (SDR) allo- cation of SDR65 million (US$95.18 million) equivalent to M1.4 billion from the International Monetary Fund (IMF).
The Governor of the Central Bank of Lesotho (CBL) Dr Retšelis- itsoe Matlanyane who also doubles as the MPC Chairperson said this al- location has increased the country’s reserves.
“As a result of the new SDR allocation, Lessotho’s official reserves increased by approximately US$18.96 million (M287 million to US$843.17 million (M1.28 billion) recorded on the 17th September 2021. The NIR (net international reserve) position was above the current NIR target floor (US$780.00 million) (M1.18 billion) by approximately US$63.17 million (M956 million).
“This allocation, which became effective on August 23 2021, is the largest in the history of the IMF. It is intended to boost global liquidity and help liquidity-constrained countries in their efforts to address the impact of COVID-19 pandemic on their economies,” she said.
These SDR allocations had driven the MPC to adjust the NIR target floor from US$780 million is approximately M1.18 billion toUS$760 million which runs in the north of M1.15 billion. According to the MPC, the NIR target is consistent with the parity of the exchange rate between Lesotho’s Loti and the South African rand.
According to the bank SDR “rep- resents an increase in the assets of the recipient while also a perpetual liability for as long as the recipient is a member of the IMF”.
The allocation will benefit all members, address the long-term global for reserves, build confidence, and foster the resilience and stability of the global economy. It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 cri- sis,” the IMF has said.
Taking stock of the global economy, the MPC highlighted that the global growth is volatile to new virus mutations, vaccines availability and the lack of vaccinations consistency among the countries.
It further mentioned that the downside risks are a result of global trade tensions, limited policy space and possible tightening of the pandemic containment efforts.
“The International Monetary Fund (IMF) World Economic Out- look report of July 2021 forecasts 2021 global gross domestic product (GDP) to grow by 6.0 per cent. Similarly, growth in the sub-Saharan African region is expected to accelerate by 3.4 per cent in the same year. Both projections remain unchanged from the Fund’s April 2021 report. Global economic activity broadly improved during the second quarter of 2021. Growth in the advanced economies was led by the United States (US) while China-led growth in emerging market economies.
“While the Lesotho policy rate continues to be aligned with, and on the lower end of, those of the sub-region, the prime lending rate in the month of August 2021 remained considerably higher at 8.2 per cent, which is 120 basis points above the sub-region’s lowest rate, which is that of South Africa, and 70 basis points above the sub-region’s second-highest rate, which is that of Namibia,” the Committee said.
The Governor noted some economic recovery signs but warned that the global economic growth prospects “remain uneven and clouded by the uncertainty surrounding the possible resurgence of the virus and emergence of new variants, and the uneven roll-out of vaccines at the country level”.
“Domestically, any prospects for growth have to be weighed against existing uncertainties. The Commit- tee notes gains and progress made on vaccination and encourages maintenance of the pace in order to pave way for easing of restrictions and attainment of herd immunity. Risks to the domestic economic outlook include the possible spread Covid-19 and the effectiveness of the infection control measures, exposure to international economic developments, domestic structural rigidities and policy uncertainty,” she stressed.
“The Committee will continue to monitor the global developments and their likely impact on domes- tic macroeconomic conditions, especially the CBL net international reserves (NIR), to take corrective action when needed,” concluded the statement.