Central Bank stabilising monetary policy amid COVID-19

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By Lineo Ramatlapeng

Central Bank of Lesotho, Governor Dr. Retšelisistsoe Matlanyane has said the bank is working tirelessly to ensure the country is cushioned from reeling hard from COVID-19 induced economic meltdown.

Matlanyane speaking following the Bank’s monetary policy committee meetings that started on May 22 said the outbreak of COVID-19 pandemic continues to devastate communities and disrupt economic activities across the globe.

She said the International Monetary fund’s (IMF) June 2020 World Economic Outlook provides that the global economic growth is expected to contract by 4.9% in 2020, in comparison to an earlier projection of 3% in April 2020.

Matlanyane emphasized this anticipated decline in global growth will be much worse than the downturn experienced during the 2008-2009 financial crisis.

Matlanyane mentioned that her Bank, in the domestic economy, acted conveniently to contain the effects of the COVID-19 shocks and maintain macroeconomic stability.

She said the bank has continued to emphasize preservation of adequate foreign reserves to guarantee the 1:1 Loti to Rand peg as it is of paramount importance, given the fixed exchange rates role as the key anchor of macroeconomic stability.

“Within the constraints of exchange rate peg of the Loti to the Rand, the bank has taken various measures to support the economy,” Matlanyane said.

Matlanyane explained these measures include cutting the Bank’s rate from 6.25 percent in March to 3.75 percent in May 2020.

The Governor said the bank postponed its implementation of Basel 11.5 to avoid associated rise in capital requirements, and to allow banks to strengthen their balance sheets.

She said the bank has also encouraged the use of mobile money, including negotiating fee reductions with mobile network operators and raising prudential limits on transactions to limit contact of persons and cash exchanging hands in order to mitigate the spread of the COVID-19 pandemic.

Matlanyane concluded that the committee will continue to monitor the global developments and their likely impact on Lesotho’s macroeconomic conditions, especially the Bank’s net international reserves with the aim of taking corrective action when needed.

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