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Central bank concerned with low credit uptake

2021-10-25  Maihapa Ndjavera

Central bank concerned with low credit uptake
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Bank of Namibia (BoN) governor Johannes !Gawaxab is concerned with the low uptake of credit from commercial entities by small to medium-sized enterprises (SMEs), noting that there seems to be uncertainty from corporates and households on opting for credit. 

!Gawaxab made these remarks last week during the quarterly announcement of the repo rate, which was left unchanged to promote the recovery of the domestic economy. He stated that loan advance books of commercial banks to SMEs stand at about N$10 billion, while for the Development Bank of Namibia, it is in the range of N$780 million.

SMEs play a crucial role in economic development and are considered a vital engine in many developing economies. They drive growth, create employment, especially among youth, and spearhead innovation.

“We need to do what needs to be done to spearhead credit in the economy. The weak update speaks loudly to a crawling economy,” he stated.

Growth in private sector credit extension moderated to an average of 2.5% for the first eight months of 2021, lower than the average of 4.1% recorded during the same period in 2020.

Furthermore, the governor said the central bank does not expect inflation, which is currently on an upward trajectory, to spiral out of control.

“Through the medium term, our baseline estimates state that in November 2021, inflation will be at 3.9%, and around 3.7% for 2021, while we expect it to rise to 4.2% for 2022. Inflation in the short-term is well-anchored, and we are not so concerned at this stage with the medium-term outlook,” explained !Gawaxab.

Commenting on the effects of monetary policy to help the domestic economy recover, he said without monetary policy interventions, the economy could have suffered a double-digit blow.

The low interest rate environment helped those currently servicing their loans, as “the reduction in short-term rates makes it affordable for those repaying. Monetary policy is still working, especially from an investment point of view, as the cost of capital to start a project is low”. 

!Gawaxab added that in order for the economy to fully recover, the best economic policy is the vaccine policy. “We need the economy to recover, and thus we need a number of people to be vaccinated in order to reopen the economy. Tourists will not come to our country if we do not achieve herd immunity,” the governor cautioned. 

At the same occasion, BoN’s Director for Research and Financial Stability Florette Nakusera said the bank forecasts that Namibia will receive good rainfall this year, and anticipates 3.2% growth for the agriculture sector in 2021, and 3.7% in 2022. 

“It is important that we take advantage of the good rainfall, expected to increase agricultural production. This will have a positive impact on livestock and crop production,” she observed.

2021-10-25  Maihapa Ndjavera

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