The Central Bank of Lesotho has reported a significant drop in its assets for May 2025, with foreign reserves falling sharply even as the Bank posted stronger profits.
According to the official return of assets and liabilities, total assets stood at M22.3 billion at the end of May, down from M23.7 billion in April. The decline of more than M1.4 billion was mainly due to lower balances with foreign banks and a reduction in rand notes and coins held by the Bank.
Balances with banks abroad fell to M6.17 billion from M7.79 billion in April, while rand holdings dropped to M262 million from over M510 million. The figures suggest the Bank had to draw heavily on reserves during the month, either to defend the loti or to meet external obligations.
Despite the tighter reserves, the Central Bank still managed to grow its operating profit. The Bank recorded a profit of M201 million for May, up from M138 million in April. This reflects stronger returns on investments, which rose slightly to M10.37 billion from M10.06 billion.
On the domestic side, internal assets remained broadly stable at M1.2 billion, with currency inventory increasing as more notes were printed or prepared for circulation. Currency already in circulation rose modestly to M1.91 billion, indicating an increase in cash flowing within the economy.
Reserves, which form the Bank’s buffer against shocks, slipped to M6.97 billion from M7.03 billion in April. Deposits held at the Bank also dropped to M7.93 billion from M9.12 billion, reflecting a general tightening of liquidity.
The monthly returns are published in line with section 53(3) of the Central Bank of Lesotho Act, 2000. The notice was signed by Finance and Development Planning Minister Retšelisitsoe Matlanyane, who is required to table the Bank’s financial position for public record.
Why It Matters
Lesotho’s financial system is tightly linked to South Africa’s through the Common Monetary Area. The loti is pegged at parity with the rand, which means the Central Bank must hold adequate foreign reserves to back every loti in circulation. The rule of thumb is that reserves should cover at least three months of imports, giving the country breathing space in times of economic stress.
Over the years, Lesotho has faced challenges maintaining strong reserves. Sharp declines in Southern African Customs Union (SACU) revenues or sudden increases in government spending have often placed pressure on the Central Bank’s position. In the early 2010s, for example, the Bank was forced to intervene heavily to maintain stability when SACU receipts fell. Similar pressures resurfaced during the COVID-19 pandemic, when reserves were drawn down to cushion the economy.
Against this backdrop, the May 2025 figures highlight a familiar concern. While the Bank’s profitability is encouraging, the erosion of reserves in a single month by more than a billion maloti is a reminder of how vulnerable the country remains to external shocks. For an economy that depends heavily on imports and remittances, any weakening of the reserve position can undermine confidence in the loti and put strain on the peg with the rand.
Economists argue that stronger fiscal discipline, better export growth, and careful management of SACU revenues are critical to ensure the reserves remain at healthy levels. Without that, the Central Bank may find itself under pressure to defend the currency more often, at a time when global conditions are already uncertain.
