Bank Rate Goes Up

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WINDHOEK The Bank of Namibia (BoN) has announced another half percent increase in the bank rate from 8% to 8.5%, which is expected to push the lending rate at local banks to at least 13.25%. Bank of Namibia Governor Tom Alweendo made this announcement late yesterday afternoon. The increase, which takes effect today, comes just two months after a similar half percentage point increase in early August. Alweendo said the Monetary Policy Management Committee (MMC) felt it necessary to take an appropriate monetary policy stance to mitigate the risks posed by inflation. “The MMC believes that the Bank Rate adjustment by this margin will not have a significant impact on real economic activities, as it is mainly aimed at taming the robust consumer demand funded by bank credit,” he added. The Bank of Namibia, he cautioned, would also continue to closely monitor domestic and international developments and their impact on inflation. According to BoN, inflation in Namibia has generally been rising since the beginning of the year up to August 2006. It reached 5.4% in August, up from 5.1% in July 2006. The increase in the average annual inflation during August was mainly attributed to the rise in the inflation of transport, which is heavily influenced by the increase in fuel prices. The other categories that contributed to the increase in inflation were alcoholic beverages, tobacco and miscellaneous goods and services. Alweendo said given the significance of the imported inflation from South Africa to Namibia, the soaring of the South African Producer Price Index (PPI) is a matter of concern. The PPI continued to grow at a faster pace of 9.2% during August compared to 8.1 during July of the same year. The depreciation of the Namibian dollar against major currencies continued into the third quarter after first being observed in the second quarter. When compared to the second quarter of 2006, the rates of depreciation were 10.9%, 13.7% and 12.4% against the US dollar, pound sterling and euro respectively. Alweendo worried that although the depreciation of the domestic currency is expected to have a positive impact on exporting industries as Namibian products become more competitive abroad, the adverse impact on inflation is a matter for concern. Speaking generally about the outlook for the Namibian economy, he said indicators show that economic activities in the country slowed down. This seemed to be in line with the deceleration observed in some of the major industrialised economies, notably the US. Latest estimates show that some key indicators in the mining, quarrying and agriculture sectors performed poorly in August 2006 compared to the previous month. “This is despite the prevailing favourable exchange rates and the high price of meat. While economic activities are slow, the growth for the year is still expected to be at a reasonable level.”