Windhoek
Private Sector Credit Extension (PSCE), or the domestic demand for credit, continues its downward spiral as it grew by only 11 percent year-on-year, the lowest level since 10.2 percent growth recorded in February 2012.
The latest figures, released by the Bank of Namibia (BoN) on September 1 as part of its monthly Money and Banking Statistics, have led to the conviction among analysts that the central bank will retain the repo rate – and by consequence interest rates – unchanged for the remainder of the year.
The most recent BoN figures indicate that slowing annual PSCE growth can be attributed to less growth in mortgage loans, which grew by 11.1 percent y-o-y in July 2016, compared to 16.7 percent in the prior year.
Mortgage loans continuously contribute above 50 percent to total PSCE and recorded its lowest growth in July 2016 since the 11 percent recorded in September 2010.
Overdrafts also grew at a slower pace of 2.1 percent y-o-y compared to a 14.5 percent recorded in the prior year. In contrast to a slowdown in credit facilities, borrowing through other loans and advances grew rapidly by 18.5 percent y-o-y compared to 14.3 percent recorded in the prior year.
On a monthly basis, growth in PSCE was mainly driven by growth in instalment credit and loans and advances categories, which grew by 1.2 percent and 3.5 percent, respectively in July 2016 compared to 1.1 percent and 0.2 percent, respectively during the prior month.
Credit through loans and advances were mainly taken up by big companies (to 2.1 percent month-on-month in July, compared to 0.7 percent in June), while for households, this category continues to shrink.
“We reiterate our expectation that BoN will retain rates unchanged for the remainder of the year,” read a credit report by Simonis Storm Securities, a local stock brokerage.
According to the latest statistics released, total Namibian debt (comprising of domestic and foreign government, corporate and household debt) grew by 31.4 percent y-o-y compared to a growth rate of 18.3 percent recorded in the prior year.
On a monthly basis, total debt grew by 2.5 percent compared to a 0.8 percent contraction recorded in the prior month.
“Positive monthly growth in total debt can be attributed to strong growth stemming from government and corporate debt. These categories (government and corporate) grew by 4.7 percent m-o-m and 1.3 percent m-o-m, respectively, compared to -2.9 percent and 0.9 percent, respectively recorded in the prior month. In contrast, household debt grew at a slower pace of 0.5 percent,” read the SSS report.
BoN’s Money and Banking Statistics further indicate that foreign reserve levels grew by 8.5 percent to N$22.8 billion in July 2016 compared to N$21 billion recorded in June 2016 and N$19.2 billion recorded at the last Monetary Policy Committee meeting held on mid-July, 2016.
BoN said the sudden growth can be attributed to N$3.5 billion inflow from the Southern African Customs Union, coupled with interest earned on investment.
“With the currency (Rand) depreciating (currently at 14.5 Rand against the USD), coupled with the expected $20 million quarterly inflow from Banco Nationale de Angola, we are of the view that foreign reserves will remain stable by the end of September 2016,” the SSS report stated.
Meanwhile, total domestic debt grew by 1 percent m-o-m to N$34.3 billion at the end of July 2016, compared to 2.1 percent growth recorded in June 2016.
Longer-term government bonds contribute about 60 percent of total domestic debt and had sharply grown by 36.0 percent y-o-y to N$19.4 billion in July 2016 from N$14.3 billion in July 2015.
Annual growth in Treasury Bills also slowed significantly by 13.2 percent, compared to 43.8 percent recorded in the prior year.