Namibian Rate Veers From South Africa’s for First Time Since ’15

WINDHOEK (Capital Markets in Africa) – Namibia, whose currency is pegged to South Africa’s, diverged from its neighbour’s moves on monetary policy for the first time since 2015 as the country seeks to curb further declines in reserves.

The southwest African nation’s Monetary Policy Committee maintained its key interest rate at 6.75 percent Wednesday. Last month, its counterpart in South Africa reduced its key gauge to 6.5 percent, making this the first time since December 2015 that the central bank didn’t follow the move set by its larger neighbour.

South Africa controlled Namibia from World War I to 1990. The Namibian dollar’s peg to the rand makes the nation’s economy vulnerable to a decline in export earnings when the South African currency appreciates against the greenback. The rand has gained 4.8 percent versus the dollar this year.

The country maintained its rate to safeguard foreign-currency reserves, which declined to 26.1 billion Namibian dollars ($2.2 billion) by March 31, the bank said.

“We expect, since Namibia now has higher interest rates than South Africa, that some of our money that goes to South Africa will remain here because the returns are higher here thus people will choose to put their money here, which will help us build reserves,” central bank Governor Ipumbu Shiimi said.

“Although reserves remain sufficient to sustain the currency peg between the currencies, it’s relatively low compared to the country’s peers in the region,” he said.

Source: Bloomberg Business News