Lesotho highlands water project prepares for 6-months shutdown

Lesotho is gearing up for a significant six-month maintenance shutdown of the Lesotho Highlands Water Tunnel, a critical water supply source to South Africa and a key generator of hydroelectric power for Lesotho. The Department of Water and Sanitation is set to reveal its plans for ensuring sustainable water provision during this shutdown. Matsela Matsela, Head of Global Markets at Stanbic Bank Lesotho, sheds light on the potential economic implications of this maintenance period. While the impact on Lesotho's economy is expected to be marginal, there are key concerns regarding electricity generation and potential water shortages. Matsela highlights the plans in place to mitigate risks, with authorities aiming to front-run water supply prior to the shutdown and increase water delivery post-maintenance to address potential shortfalls. Farmers along the Vall River are expected to be affected by reduced water flow, particularly in the Bethlehem and Ritz areas. Despite these challenges, authorities are working to minimize disruptions. Inflation trends in Lesotho are closely tied to South Africa, with imported food and beverages playing a significant role. The recent uptick in inflation to 7.4% in March mirrors developments in South Africa and reflects the impact of exchange rate fluctuations on food prices. However, efforts to enhance agricultural self-sufficiency through initiatives like the Millennium Challenge account offer hope for reducing import dependency and managing inflation. The looming El Nino threat poses additional risks to the agriculture sector, though advancements in farming technologies are expected to help mitigate potential fallout. Monetary policy in Lesotho, anchored by the Maluti to South African rand peg, remains central to economic stability. With the peg serving as a crucial safeguard against external shocks, policymakers are closely monitoring reserves to uphold financial resilience. Despite uncertainties in global markets, prudent reserve management is key to sustaining Lesotho's economic stability amidst external pressures.