Windhoek-The repo rate, essentially the rate that determines the interest rates charged by banks on loans, remains unchanged. According to the Bank of Namibia (BoN), which determines the repo rate, the decision to leave it unchanged at 6.75 percent was motivated by the need to allow consumers some spending power, and the economy to rebound without subjecting it to further financial burdens, such as high interest charges.
Very few consumers are taking out mortgages, buying cars through the bank or taking out instalment credit. And the slowness in the numbers went down over the last three months up to October 2017.
Locally, the economy has been very weak in the first 10 months of this year, with very little activities taking place in the construction sector, which has taken a severe knock following the government’s budget cuts that halted many infrastructure projects. As a result, the construction sector had to shed jobs. Further, the wholesale and retail sector has also been under pressure as few people are buying merchandise.
The slag in consumer spending could be seen in the credit extended to consumers, which at 7 percent for the first 10 month of the year was very low, compared to 11.8 percent in 2016.
“This decision was taken following a review of global, regional and domestic economic and financial developments,” said BoN Governor Ipumbu Shiimi at the sixth and last monetary policy announcement of the year yesterday.
There is, however, a positive sense for a good 2018, owed to both the performance of some sectors and what is happening in the global economy.
Further, Namibia’s fiscal standing is good with an official stock of N$31.6 billion in international reserves. This represents an increase both on a monthly and annual basis.
“The annual increase mainly stemmed from high SACU receipts, debt repayment by the Banco Nacional de Angola (Angola’s reserve bank) and the loan from the African Development Bank,” said Shiimi.
Currently, the country’s international reserves are estimated to cover 5.1 months of imports of goods and services. The reserves remain sufficient to sustain the currency peg between the Namibia dollar and the South African rand.
The other good news is that Namibia’s other key economic activities such as mining, agriculture, livestock marketed, communication and manufacturing output improved over the same period.
“The momentum displayed by the latter activities, if sustained, would create better prospects and help with economic recovery going forward,” Shiimi projected.
Globally, there is an expectation of a buoyant economic recovery in 2017, with projections of a 3.6 percent growth up from 3.2 percent in 2016. This is on account of somewhat higher growth in both the advanced economies and emerging market and developing economies.
“The expected growth in 2017 will be reinforced by improved investment, trade and industrial production, coupled with strengthening business and consumer confidence in the medium term,” said Shiimi.