WINDHOEK – The Bank of Namibia (BoN) performed fairly well during 2014 to pay dividends of N$158.1 million to the Treasury, despite experiencing a year in which Namibians borrowed heavily to spend recklessly and inflict a negative impact on the country’s current account and international reserves.
“Although the global economy experienced another tough year, the financial performance of the Bank of Namibia improved in comparison with the previous financial year. This was complemented by prudent management of the bank’s operational expenditure and adjustments in its investment strategies,” said the BoN governor Ipumbu Shiimi yesterday.
Nevertheless, 2014 was the year in which Namibians bought too many luxury items on credit, from abroad, to an extent that the country’s external balance recorded a deficit because of a widening deficit in the current account, even at a time when the Namibian dollar exchange rate was favourable to major foreign currencies.
“Large increases in private spending, fuelled by rapid credit growth, have contributed to the widening of the current account, despite the depreciated exchange rate,” the BoN said in its annual report for 2014.
It was the heavy borrowing of money to finance the importation of non-productive goods, mainly vehicles, which forced the BoN to increase the repo rate by 6 basis points in 2014. Annual growth in private sector credit for the year had risen to 16.4 percent, and was driven by both businesses and individuals.
BoN’s stock of international reserves also decreased as a result of high imports by Namibians, with increased import payments for goods and services lowering the level of international reserves to N$13.5 billion as of December 2014, from N$15.7 billion in the previous year.
BoN nevertheless says the reserves were well sufficient to support the fixed exchange rate arrangement and meet international obligations.
Government debt also increased during the 2014 financial year, reaching a higher percentage over the preceding year, with a deficit of 5.4 percent of the gross domestic product (GDP).
However, BoN maintains the widening in government spending did not balloon the debt target as a percentage of GDP to above the debt ceiling of 35 percent, but remained at 22.9 percent as at the end of December 2014.
Government loan guarantees were also at 5.3 percent in the year, from 6 percent in 2013, and within the government ceiling of 10 percent.