Windhoek
Despite expectations by some analysts that the repo rate would be increased yesterday, the Bank of Namibia decided to keep the rate unchanged at 6.5 percent. The central bank said this decision was underpinned by the recent moderation in instalment credit to households and to continue supporting the domestic economy.
“While the Monetary Policy Committee welcomes this recent moderation in instalment credit extended to households, a large amount of these loans is still used to finance unproductive luxury goods, thus exerting additional pressure on the country’s international reserves,” said the deputy governor of the bank, Ebson Uanguta.
He further mentioned that key economic indicators in the domestic economy continued to show improvements despite weak activities in the mining sector. “The demand for credit was strong, despite the recent moderation in instalment credit extended to the household sector. The annual inflation rate remains low. Risks to the domestic economic outlook include soft commodity prices and the prevailing drought,” explained Uanguta.
He added that the improvement in the domestic economy during the first eight months of 2015 was primarily driven by continued robust construction activities in the public and private sectors. The transport and communication sector also showed a positive performance during the review period, compared to the same period of 2014.
Meanwhile, risks to domestic growth remain the slower growth of trading partners such as China, soft commodity prices and the prevailing drought.
“The stock of international reserves remains sufficient to sustain the one-to-one link of the Namibia dollar to the South African rand, being 3.3 times higher than the currency in circulation at the end of August 2015,” said Uanguta. He noted that the level of international reserves stood at N$13 billion at October 19.
BoN also pointed out that the global economy moderated during the second quarter of 2015, reflecting a further slowdown in emerging market economies and weaker recovery in advanced economies. These developments have resulted in the monetary polecat stance in advanced economies remaining unchanged and supportive of economic growth, while those in emerging markets were mixed over the review period.
In emerging market economies real gross domestic product growth for South Africa and India slowed during the second quarter of 2015, while that of China remained constant.
Recently released data for China however showed moderating growth below 7 percent during the third quarter.
“The slowdown in the Chinese economy is likely to negatively affect commodity prices and therefore export earnings of mineral producing countries, including Namibia,” said Uanguta. BoN keeps repo rate at 6.5 percentEbson Uanguta