The Bank of Namibia has reduced the repo rate by 25 basis points, bringing it down from 6.75% to 6.50%, to support the country’s weak economy.
This is contrary to some analysts who expected the central bank to maintain the repo rate at 6.75%, as they were not convinced there was scope for more than one rate cut before the end of 2025.
The repo rate cut was announced yesterday by the Bank’s governor Johannes !Gawaxab.
The repo rate is the interest rate at which the central bank lends money to commercial banks.
When the repo rate is reduced, it usually becomes cheaper for banks to borrow money.
In turn, banks are expected to lower their own interest rates on loans to customers.
As a result of the central bank’s decision, commercial banks in Namibia are now expected to reduce their prime lending rate to 10.125%.
This means that customers will likely pay less interest on loans such as car repayments, mortgages and personal loans.
It also makes borrowing cheaper for businesses, which could help boost economic activity.
“The Bank decided to cut the repo rate because of slowing economic growth and low inflation. Inflation remains under control, and the outlook for the coming months is also positive. Meanwhile, Namibia’s economy has shown signs of weakness,” said !Gawaxab.
He noted that domestic economic activity has weakened.
Inflation remains subdued, while growth in Private Sector Credit Extension (PSCE) has improved further, although it remains relatively weak.
The merchandise trade deficit has narrowed further, while the stock of international reserves remains sufficient to maintain the currency peg and meet the country’s international financial obligations.
He added that real gross domestic product (GDP) growth fell to 1.6% in the second quarter of 2025, compared to 3.3% in the same period last year.
Key sectors like manufacturing, fishing and agriculture performed poorly.
Early indicators also suggest that growth has continued to slow in the first eight months of 2025.
“Reducing the repo rate will provide relief to individuals and businesses, and may encourage more borrowing and spending,” the Bank said.
The Bank added that Namibia’s foreign reserves remain strong, which supports the country’s ability to maintain its currency peg and meet international financial commitments.
Capital outflows so far have been stable and manageable.
Looking ahead, economic growth for the whole of 2025 is expected to be weaker than in 2024, when growth was 3.7%.
The central bank hopes that the lower interest rates will help ease pressure on households and businesses during these challenging times.
“Pivoting to the external sector, Namibia’s merchandise trade deficit narrowed by 16.1% to N$17.9 billion during the first eight months of 2025, relative to the corresponding period in the previous year.
The improved trade deficit was on account of a faster increase in export earnings, especially from uranium and gold, relative to import payments during the period under review,” said !Gawaxab.
He added that, the stock of international reserves stood at N$54.7 billion at the end of September 2025, a decline from N$58.1 billion recorded at the end of July.
The reduction in foreign reserves was mainly ascribed to elevated imports, foreign payments by the government and a stronger exchange rate.
“This level of foreign reserves translates to an estimated import cover of 3.6 months, remaining adequate to sustain the currency peg between the Namibia Dollar and the South African Rand and meet the country’s international financial obligations,” he said.