Between January and June this year, Namibians accumulated debts of up to N$6.3 billion through credit borrowing from local commercial banks – a revelation that has plunged the Bank of Namibia into a state of increased concern.
Even more worrying is the fact that this credit borrowing excludes home loans, with Namibians mostly getting credit to bankroll lavish lifestyles that could lead to bad debt.
This is contrary to the expectations of the central bank, which had hoped the two monetary policy interventions that increased the repo rate twice this year, would discourage households from further borrowing.
In February this year Namibian consumers had a debt bill of N$5 billion, a tab accumulated over a period of six months.
“[We] are still concerned about the high import bill resulting from the importation of unproductive goods such as luxury vehicles, which put additional pressure on the country’s international reserves,” the central bank’s monetary policy committee expressed this week.
Even though there has been “an average” slowdown in household borrowing, the Bank of Namibia says it would maintain a hawk’s eye on household debt growth, with the hope that it would eventually go down and not up.
Yet this is of no comfort to the central bank’s monetary policy committee that says the only reason there is a notable, albeit moderate, slowdown in private credit extension is mainly because of businesses that restrained themselves from borrowing in the month of June 2015.
Credit extended to households “slowed moderately, on average, over the first six months of 2015” to 12.8 percent from 14.8 percent recorded in 2014. But instalment credit still grew strongly on average by 20.9 percent to N$6.3 billion over the first six months of 2015. “A positive development, however, is emerging with both the three-month and six-month moving average of annual growth rates slowing down,” it said.
Thus, the central bank, seemingly with its fingers crossed, continues to plead that Namibians stop borrowing money to splash on imported bling such as luxury vehicles and goods, which many households could not afford on their savings.
The committee says the international stock reserves remain adequate to maintain the one-to-one link of the Namibian dollar to the rand at 3.9 times higher than the currency in circulation. As of August 18 the level of reserves stood at N$13 billion.
The monetary policy committee resolves to leave the repo rate unchanged at 6.5 percent.
Meanwhile, Namibia’s annual inflation is said to have declined during the first six months of the year and is expected to remain manageable for the rest of the year. The average inflation rate for the period slowed to 3.4 percent from 5.6 percent of the same period in 2014.
In addition, the domestic economy improved in the first six months of the year largely because of construction activities in both the public and private sectors, as well as because of the wholesale and retail trade doing well.
“Going forward the Namibian economy is expected to grow by 5 percent in 2015 up from 4.5 percent in the preceding year,” Bank of Namibia said. The risks from low commodity prices, adverse weather conditions and slow growth in the economies of Namibia’s trading partners remain though.