Bank of Namibia Leaves Repo Rate Unchanged at 6.5%

Windhoek, Namibia, Capital Markets in Africa — Bank of Namibia keeps the Repurchase (Repo) rate unchanged at 6.50 percent at the Monetary Policy Committee  (MPC) meeting held on the 8 December 2015, according to statement issued by Governor  of the Bank,  Mr. Ipumbu Shiimi. 

In the statement, the decision to keep the rate at 6.50 percent was underpinned by the recent downward trend in the growth of instalment credit extended to households and the need to continue supporting the domestic economy.  The Repo rate was raised by 25 basis points in February and June 2015 (see chart below for history of benchmark rates), to contain high growth in household credit, which are primarily used to finance unproductive imported luxury goods, hence putting pressure on the foreign reserves of the country. 

The MPC’s statement further stated that the Namibia’s economy displayed a satisfactory performance during the first ten months of 2015, despite weak activities in the mining sector. This is as a result of robust construction activities in the public and private sectors and contribution by other sectors such as manufacturing, transport and communication.

Bank of Namibia’s statement also highlighted that the declined in the annual inflation rate during the first ten months of 2015 will persist for the rest of 2015. The annual inflation for the first ten month of the year was lower at 3.4 percent compared to 5.5 percent during the same period in 2014. The lower inflation was mainly due to declining transport inflation on the account of low and favourable international oil price as well as housing and food inflation.

Furthermore, the bank stated that the stock of international reserves remained sufficient to sustain the one-to-one link of the Namibia Dollar to the South African Rand, begin 5.5 times higher than the currency in circulation as at the end of October 2015. The level of reserves rose substantially on a monthly basis to about N$23 billion as at the 3^rd of December 2015, as a result of the issuance of the Eurobond and Southern African Custom Union receipts.

However, the bank pointed out the risks to the Namibian economic outlook to include soft commodity prices, the prevailing drought and slow recovery in the country’s trading partner economies.

The MPC next meeting is scheduled for the 9^th of February 2016.