Windhoek
Consumers with any sort of repayments at commercial banks will have to dig deeper into their pockets while those saving at commercial banks will reap more rewards following the Bank of Namibia’s announcement yesterday that the repo rate has increased by 25 basis points to 6.75 percent. The central bank said the decision was necessary to avoid possible capital outflows and to align interest rates with the Common Monetary Area (CMA).
“While the Monetary Policy Committee welcomes the continued slowdown in the growth in instalment credit, the recent significant increases in other loans and advances are a concern. With the increase in the repo rate it is expected that deposit taking institutions will also increase deposit rates by the same margin, thus encouraging savings,” said Bank of Namibia Governor Ipumbu Shiimi.
Meanwhile, local stock brokerage, Simonis Storm Securities (SSS), yesterday said the increase was to be expected.
“This outcome is well in line with our expectations, which was premised on the fact that foreign reserves are currently at sufficient levels; continuous slowdown in instalment credit, mortgage loans and vehicles sales; stable inflation and sustainable growth; as well as the similarity of the historical trends with respect to interest rates development between Namibia and South Africa, which makes it reasonable to expect low interest rates in Namibia relative to SA.
Nevertheless, BoN cited fear of possible capital outflow, which could put pressure on the country’s reserves, as the main attribute for this increase,” said SSS’s economist, Frans Uusiku.
Commenting on local developments, Governor Shiimi said the domestic economy displayed positive performance during 2015, despite weak commodity prices.
“Although the annual inflation rate remained low and stable in 2015, it rose in January 2016 and is expected to rise further for the most part of 2016. While the domestic economy is expected to record favourable growth in 2016, risks to domestic economic growth remain and include soft commodity prices, the effects of the drought and slow recovery in the country’s trading partner economies,” said Shiimi.
Going forward, the central bank expects the local economy to grow by 4.3 percent in 2016 from an estimated 4.5 percent in 2015, supported by good growth prospects across most industries.