Latest economic figures show that Lesotho's inflation dropped by just over one per cent between February and march this year, an indication that the country would realize poverty alleviation in a long way.

"It is also hoped that with the fall in inflation both in South Africa and Lesotho, the interest rates will decline, and economic growth be stimulated. The fall in inflation will also go a long way towards poverty alleviation," said a statement from the Central Bank of Lesotho on Monday.

The Central Bank statement said latest figures from the Bureau of Statistics showed that the inflation dropped from 8.8% in February to 7.7% in March.

At its meeting on Tuesday last week, the Monetary and Exchange Policy Technical Committee in Lesotho is said to have discussed the latest economic developments, looking at the outcome and implications.

Some of the indicators identified to have influenced the rate of inflation drop were the lowering cost of food and non-beverages, clothing and footwear, as well as housing and maintenance.

The committee is also reported to have observed the falling of prices of imported goods due to the strengthening of the South African Rand against the US Dollar and other major currencies in the world market.

"The rand strenghened by about 40 per cent in the last six months. This has influenced the decline in the inflation rate as Lesotho imports more than 90 per cent of goods and services from South Africa," the Central Bank statement said.

The Committee further observed that contrary to wide expectations that the price of oil would increase rapidly as a result of the US-led war in Iraq, oil price has been falling, hence also a positive impact of Lesotho's inflation rate.

There are however other negative sides of the story with the South African Rand gaining momentum against the US Dollar. "The strong Rand against the USD is expected to hurt the competitiveness of the Lesotho's exports as well as the tourism industry," cited the Central Bank statement, further adding that this is due to the fact that the US is the main importer of Lesotho's textiles.

Already some economic observers see a big threat to the textile industry in Lesotho with the declining US Dollar power. Some have observed that with the production costs and returns likely to reach immeasurable imbalance, many created jobs in the Lesotho factories could be at stake, or the already planned industrial expansions in the pipeline could be hurt.

Lesotho is currently ranked in the top five African countries exporting to the US under the AGOA and one of the fastest growing players in the agreement.