By Thoboloko Ntšonyane
MASERU – There seems to be no end in sight with the ever increasing food prices.
In its 95th Meeting on Tuesday this week, the Central Bank of Lesotho (CBL)’s Monetary Policy Committee (MPC) has cautioned that the consumers will have to fork deeply out of their pockets to buy food.
“Food prices are anticipated to escalate further due [to] expected low domestic harvest following excessive rainfall,” the Committee has said.
The Acting Governor of CBL who also doubles as the Chairperson of the MPC, Lehlomela Mohapi, attributed this prices increase to an ongoing war between Russia and Ukraine.
The Russia-Ukraine invasion has plunged most parts of the world into food prices inflation. This ravaging war coming on top of the COVID-19 pandemic induced economic volatility which continues to bear dire consequences on food prices.
Russia and Ukraine are the largest grain producers.
This tension has occasioned the rise on major commodities such as wheat, corn, cooking oil, fertilizers and fuel. The two nations are said to account for about 30 percent of global wheat exports and around 80 percent of global sunflower exports.
Also, Russia is one of the largest exporters of fertilizers.
Meanwhile, the African Development Bank has earmarked US$1.5 billion approximately M23.4 billion to counter the food crisis. “The African Development Bank Group’s Board of Directors has approved a $1.5 billion Emergency Food Production Facility to help tackle the global food crisis sparked by the Russia-Ukraine conflict,” reads the Bank’s statement issued on May 23.
The Acting Governor highlighted that the domestic economic activity had experienced decline in first quarter of the year.
“Economic activity as measured by the change in the Quarterly indicator of Economic Activity (QIEA), slowed to 1.8 per cent from 3.9 per cent between December 2021 and March 2022. Much of the growth in economic activity was underpinned by a rise in domestic demand during the review period.
“Inflationary pressures remained heightened in April 2022. The domestic inflation rate, as measured by the year-on-year percentage change in the consumer price index (CPI), rose slightly from 7.2 per cent to 7.3 per cent between March and April 2022. The key drivers were food and non-alcoholic beverages, energy and transport,” he said.
Also on domestic economy, the MPC said the current account deficit had seen an improvement from a deficit of 5.5 per cent of gross domestic product (GDP) in the last quarter of 2021 to a deficit of 1.0 per cent of GDP in March 2022.
“While the global macroeconomic environment somewhat improved during the review period, the vulnerabilities remain. Global financial markets remain mired in uncertainty. The domestic economy registered moderate growth in the first quarter of 2022 compared to a relatively higher growth in the preceding quarter. In line with the rest of the world, domestic inflationary pressures remain elevated,” Lehlomela said.
Owing to and having taken into account the Net International Reserve (NIR) developments and outlook, regional inflation and interest outlook, domestic economic conditions as well as the global economic outlook, the Committee had resolved to revise downwards the NIR target floor of US$820 million (M12. 8 billion) to US$810 million (M12. 6 billion).
It has also increased the CBL rate from 4.25 per cent per annum to 4.75 per cent per annum. “The rate, set at this level, will ensure that the domestic cost of funds remains aligned with the rest of the region.”
The Committee has also noted that in light of many economic developments unfolding, the South African Rand, which Loti is closely pegged to is expected to remain resilient at its current levels
