The Monetary Policy (MPC) of the Central Bank of Lesotho (CBL) held an extraordinary meeting on Tuesday the 14th April 2020, to consider developments since its last meeting held on March 23rd 2020.

In a statement the MPC said in its last meeting in March, the global spread of the coronavirus has continued to have devastating effects across the world, more especially in major and developing economies.

The MPC said given measures put in place to stem the outbreak of the virus, economic activity in Lesotho is expected to contract by 3.1%.

The key sectors that are likely to be affected are mining with a decline of 13.4%, construction with a decline of 10.2%, and textiles with a 14% decline, and these developments have a significant negative impact on employment in Lesotho.

The MPC stated that inflation was recorded at 4.2% in February, in contrast to 4.1% in January 2020.

In the banking sector the low business activity is likely to increase credit risk, as borrowers will struggle to meet loan repayment schedules, and result in high non-performing loans.

While this would ordinarily lead to tighter financing conditions, the CBL has taken steps to ease financing conditions, maintain the NIR target at US$660 million, and reduce the CBL rate by 100 basis points, from 5.25% to 4.25% per annum.