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Central Bank of Lesotho Quarterly Review

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Central Bank of Lesotho Quarterly Review CENTRAL BANK OF LESOTHO QUARTERLY REVIEW June 2017 MASERU KINGDOM OF LESOTHO Table of Contents 1. Executive Summary ................................................................................... 5 2. International Economic Developments .................................................... 6 ADVANCED ECONOMIES ............................................................................................................. 7 EMERGING MARKET ECONOMIES .......................................................................................... 9 COMMODITIES ................................................................................................................................. 10 EXCHANGE RATES ........................................................................................................................ 13 3. Real Sector Developments ........................................................................ 15 OVERVIEW ......................................................................................................................................... 15 OUTPUT DEVELOPMENTS ......................................................................................................... 15 EMPLOYMENT DEVELOPMENTS ............................................................................................ 19 PRICE DEVELOPMENTS ............................................................................................................... 21 4. Monetary and Financial Developments ................................................... 24 OVERVIEW ......................................................................................................................................... 24 BROAD MONEY (M2) ...................................................................................................................... 24 CREDIT EXTENSION ..................................................................................................................... 27 LIQUIDITY OF COMMERCIAL BANKS ................................................................................... 29 MONEY AND CAPITAL MARKET DEVELOPMENTS ........................................................ 31 5. Government Finance ................................................................................ 35 OVERVIEW ......................................................................................................................................... 35 REVENUE ........................................................................................................................................... 35 TOTAL EXPENDITURE ................................................................................................................. 36 FINANCIAL ASSETS AND LIABILITIES .................................................................................. 38 TOTAL PUBLIC DEBT .................................................................................................................... 39 6. Foreign Trade and Payments ................................................................... 41 OVERVIEW ......................................................................................................................................... 41 CURRENT ACCOUNT ..................................................................................................................... 41 CAPITAL ACCOUNT ....................................................................................................................... 44 FINANCIAL ACCOUNT .................................................................................................................. 45 RESERVE ASSETS ............................................................................................................................. 45 2 List of Tables Table 1: Key World Economic Indicators ..................................................................................................... 7 Table 2: Domestic Claims (Million Maloti: End Period) ................................................................................ 25 Table 3: Net Foreign Assets (Million Maloti: End Period) ............................................................................. 26 Table 4: Components of Money Supply (Million Maloti: End Period) ........................................................ 27 Table 5: Credit Extension by Economic Activity (Million Maloti) .......................................................... 28 Table 6: Components of Liquidity (Million Maloti) ...................................................................................... 30 Table 7: Sources of funds for ODCs (Million Maloti) .................................................................................. 31 Table 8: Interest Rates ..................................................................................................................................... 32 Table 9: Holding of Bills and Yields (Million Maloti) ................................................................................... 33 Table 10: Holding of Bonds (Million Maloti) ................................................................................................ 33 Table 11: Treasury bonds Maturity Dates and Coupon ............................................................................. 34 Table 12: Statement of Sources and Uses of Cash (Million Maloti) ........................................................... 38 Table 13: Public Debt Stock (Million Maloti) ................................................................................................ 40 Table 14: Current Account Balance (Million Maloti) .................................................................................... 42 3 List of Figures Figure 1: Average Price of Gold .................................................................................................................... 10 Figure 2: Average Price of Platinum ............................................................................................................. 11 Figure 3: Average Price of Oil ....................................................................................................................... 12 Figure 4: Average Price of Maize ................................................................................................................... 12 Figure 5: Average Price of Wheat .................................................................................................................. 13 Figure 6: Nominal Exchange Rate of Loti against Major Trading Currencies ....................................... 14 Figure 7: Mining and Quarrying Index ......................................................................................................... 16 Figure 8: Broad Money (M2) .......................................................................................................................... 24 Figure 9: Net Foreign Assets (percentage shares) ............................................................................................. 26 Figure 10: Distribution of Credit (Percentage Shares) ..................................................................................... 28 Figure 11: Credit Extension to Household (Million Maloti)........................................................................ 29 Figure 12: Short Term Interest Rates (Per Cent per Annum)........................................................................ 32 Figure 13: Fiscal Balance (Per cent of GDP) ................................................................................................... 35 Figure 14: Total Revenue (Million Maloti) ..................................................................................................... 36 Figure 15: Total Expense (Million Maloti) ..................................................................................................... 37 Figure 16: Total Non-financial assets or Capital expenditure (Million Maloti) ......................................... 37 Figure 17: Net Cash Inflow from Financing Activities (Million Maloti) ................................................... 39 Figure 18: Outstanding Public Debt (Million Maloti) ................................................................................... 40 Figure 19: Direction of Merchandise Exports (Percentage Share) ................................................................ 43 Figure 20: Capital Account (Million Maloti)................................................................................................... 44 Figure 21: Financial Account (Million Maloti) ............................................................................................... 45 Figure 22: Reserves Assets .............................................................................................................................. 46 4 1. Executive Summary The global economy displayed signs of recovery during the review quarter. In particular, growth was robust in advanced economies on account of stronger domestic demand, buoyant consumer spending as well as business investment. However, UK was an exception as it registered a drastic slowdown in output growth following a fall in production. Conversely, growth in emerging market economies picked-up during the second quarter of 2017. This was against a backdrop of firmer exports coupled with increased output by the extractive sector. The South African economy emerged from the technical recession and grew by 2.5 per cent supported by higher activity in agriculture,
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