THE Central Bank of Lesotho (CBL) has increased its interest rate to
7.00 percent from 6.75 percent, in a move meant to achieve
macro-economic stability in the country.
However, this is likely to cause ripple effects in the various sectors
of the economy, with some financial experts hinting this was going to
trigger an increase in the cost of borrowing money, as commercial
banks will pass-on the costs to the clients.
Announcing the adjustment on Tuesday last week, following the Banks’s
Monetary Policy Committee sitting, CBL Governor, Retšelisitsoe
Matlanyane, also revealed the Net International Reserves  target floor
has been increased from US$745 million to US$770 million.
The Monetary Policy Committee regularly sits to determine monetary
targets to ensure macro-economic stability in the country.
However, the CBL rate is applied when the central bank lends money to
commercial banks. Therefore, the increase in the CBL rate, among other
factors, is expected to raise loan interest rates as the banks will
pass on the cost to consumers through adjusting their prime lending
rates by at least 25 basis points.
According to an economic expert and former Minister of Finance,
Timothy Thahane, the impact of this can be seen in the reduction in
the amount of lending done by banks to consumers, as this was likely
to contain inflation by discouraging borrowing by consumers