Overall consumer price inflation (CPI) in Lesotho increased by 5,3% year-on-year (y/y) in May and 5,1% in April, Standard Bank said in its research brief on the country, citing the data released by Lesotho Bureau of Statistics.
Food and non-alcoholic beverage prices rose by 3,1% y/y in May and 2,3% y/y in April. Food and non-alcoholic components — with a 39,8% weight in the index — were the largest contributor to overall inflation during the period under review, Standard Bank economist and author of the brief Jan Duvenage noted.
The Southern African kingdom’s economic developments tend to be largely influenced by the economic situation in neighbouring South Africa. The two countries also belong to the Common Monetary Area. The South African rand (to which Lesotho’s loti is pegged at 1:1) traded firmer in June. The hike in the United States federal fund’s interest rate failed to boost the US dollar and Duvenage expects general weakness in the greenback.
South Africa’s CPI rose 0,6% y/y in May, 0,2% in April and 0,4% in March while CPIX (consumer prices excluding mortgages) remained within the South African Reserve Bank inflation rate target range of 3% to 6%.
However, the Bank sees CPIX exceeding the target band by the end of 2004 and into 2005.
“Lesotho’s annual inflation is expected to average about 5,6% in 2004. Low inflation in South Africa will help to moderate price increases in Lesotho through close trade links (in 2001 about 95% of imports were from South Africa),” Duvenage said.
“But food aid agencies expect that the harvest will be half of last year’s: this year is the third consecutive year of food deficits.”
He added that if food inflation rises to over 30% as experienced in 2002, overall inflation will quickly resume its upward trend. – I-Net Bridge