BoN says financial systems sound

WINDHOEK, 27 Apr– Amid weak economic growth in 2016 and 2017, Namibia’s financial system remained financially sound, safe and resilient with no disorderly functioning of the financial markets, the Bank of Namibia (BoN) revealed on Friday.
The financial system is composed of banks, non-bank financial institutions and the payment system.
Speaking at the 2018 Financial Stability Report release here on Friday, BoN Governor, Iipumbu Shiimi said the domestic economy contracted in 2017 when compared to 2016, which increased vulnerability in some key sectors.
“The performance of the Namibian banking sector has been sound, although the asset quality deteriorated, consistent with weakness of the economy,” said Shiimi.
During the period under review, non-banking financial institutions remained financially stable, sound and continued to grow their assets.
Additionally, Shiimi noted that the payment system and infrastructure continue to perform efficiently and effectively.
The domestic economy contracted in 2017, with the real Gross Domestic Product contracting by 0,8 per cent that year from a positive growth rate of 0,7 per cent in the previous year.
Growth is projected to improve steadily by 1,4 per cent in 2018.
However, the risks to the domestic economy in 2017 remain pronounced, primarily due the fall in demand for uranium, he added.
“The slowdown in the economy in 2017 has contributed to the shedding of jobs in various sectors of the economy, thereby resulting in the increase in non-performing loan ratios as household income became constrained,” said Shiimi.
More so, although there was a slight decrease in household debt, it remained high in comparison to disposable income.
“While the level of household indebtedness moderated slightly, corporate debt increased during the period under review,” Shiimi said.
As it stands, household debt relative to disposable income dropped slightly from 84,1 per cent in 2016 to 83,3 per cent in 2017, in line with the slow growth in total extended credit in 2017.
“We are at a level of advanced countries (in terms of indebtedness), but we are not an advanced country,” said Shiimi.
Shiimi said the situation where some Namibians use over 60 per cent of their salaries to service their debt cannot continue unabated.
BoN and Namfisa are working on a policy that will put a threshold as to how much debt Namibians can take and still be able to honour financial commitments, he explained.
At the moment, the country’s economic slowdown is the main threat to Namibia’s financial system.
(NAMPA)