WINDHOEK – The last four months have not been kind to Namibian households that, as people would testify, found themselves scraping coins together just to pay for the daily bread and butter.
As though this was not hard enough, economists are warning that according to their calculations the prices for food are likely to continue picking up throughout the year due to expected price increases in maize and oil.
An increase in oil prices not only impacts those with cars and taxi fares – but also influences the prices of food, as the bulk of Namibian food and goods have to be transported, a cost that is passed on to consumers.
Newly released economic data shows a higher increase in food prices during the month of May, at 3.9 percent, because of increases in prices for bread and cereals that have previously been decreasing every month since April 2017.
To make things worse the price for meat – without which a dinner in many a household would not be complete – shot up 8.5 percent in May, as did the price of fruits which went up 12.6 percent and vegetables that shot up 5.8 percent.
“We expect food prices to continue to increase,” noted Klaus Schade, the research associate with the Economic Association of Namibia. Schade says that the increase in food prices is bad news for low-income earners and the poor since they spend the largest share of their total consumption on these items.
A demonstration of the economic squeeze Namibian households are under is the lack of appetite for mortgages, overdraft and instalment credit experienced by banks in the period between January to April this year. According to Bank of Namibia the annual growth rate for private sector credit extension stood at 5.7 percent, lower than the 7.8 percent recorded over the same period in 2017.
“The slower growth in private sector credit extension is due to reduced demand for credit by both the household and corporate sector, especially in the form of mortgage, overdraft and instalment credit,” Iipumbu Shiimi, the governor of the Bank of Namibia, said on Wednesday when he announced that the repo rate would remain unchanged at 6.75 percent.
The Bank of Namibia also noted that economic activities in the country did not do well in the first four months of 2018, with a slowdown in wholesale and retail trade as well as in the fishing sector. The transport sector was also affected by the surge in oil prices. “Oil prices have been on the increase, triggering fuel price increases that will have impacts on the transportation costs of goods and eventually on the production goods of businesses, as well as the cost of consumer products,” noted Schade.
Namibia’s international reserves are also squeezed with the Bank of Namibia saying the stock stood at N$28.1 billion as of May 31, a decline of N$2.6 billion on a monthly basis. These reserves are enough to cover 4.7 months of imports of goods and services. But they are not where they should be.
“Although reserves remain sufficient to sustain the currency peg between the Namibian dollar and the South African rand, it is relatively low compared to Namibia’s peers in the region,” Shiimi said.