Staff Writer
WINDHOEK, April 19 — The Bank of Namibia (BoN) has increased the repo rate by 25 basis points, taking it from 7.00% to 7.25%, which in turn brings the prime lending rate to 11.00%. According to Johannes !Gawaxab, the Governor of the Bank of Namibia, the decision was taken to contain inflationary pressures, stem their second-round effects, and anchor inflation expectations. The move is also deemed appropriate to safeguard the one-to-one link between the Namibian Dollar and the South African Rand.
Touching on the domestic economy, !Gawaxab stated that annual growth in Namibia’s real Gross Domestic Product (GDP) rose to 4.6% in 2022 from 3.5% in 2021, thanks to stronger growth rates in the primary and tertiary industries, as well as a rebound in the secondary industry. While activity in the construction sector continued to decline, sectors such as mining, manufacturing, transport, communication, and tourism, as well as wholesale and retail trade, saw a steady uptick.
However, !Gawaxab warned that risks to the domestic economic outlook remain and can emanate from weakening global economic activity, tightening of monetary policy globally, and persistent inflation. Internal risks include water supply interruptions, particularly in the coastal towns, and the looming drought.
Inflation has also deteriorated since the last Monetary Policy Committee (MPC) meeting, rising to 7.1% during the first three months of 2023 compared to 4.5% during the corresponding period in 2022. The increase was primarily driven by food and transport inflation. Among the Advanced Economies, inflation eased in the United States (US) and Euro area, but it increased in the United Kingdom (UK). Inflation rates in the key monitored Emerging Markets and Developing Economies (EMDEs) moderated most recently, except in South Africa where it increased slightly.
!Gawaxab explained that most monitored central banks continued to increase policy rates at their latest monetary policy meetings, albeit at a slower pace. While the South African Reserve Bank raised its policy rate by 50 basis points in March 2023, compared to 25 basis points at the previous meeting, the central banks of Japan, China, Russia, and Brazil maintained their policy rates.
As of the end of March 2023, the stock of international reserves increased to N$48.5 billion, from N$47.4 billion in February 2023. The governor of the central bank stated that the rise in the level of international reserves was driven by the depreciation of the Namibian Dollar against the US Dollar. At this level, the stock of international reserves is estimated to cover 5.1 months of imports.
In conclusion, the BoN’s move to increase the repo rate by 25 basis points to 7.25% will take the current negative real policy interest rate to a positive rate and is expected to support the domestic economic recovery. The bank will continue to monitor these developments and their potential effects on the domestic economy and act appropriately, in line with its mandate to ensure price stability in the interest of sustainable economic growth and development of the country.
– Namibia Daily News
