The Bank of Namibia (BoN) says the country’s financial system is robust and resilient to withstand elevated risks and vulnerabilities emanating from the global environment.
This was after several stakeholders, including the government, had raised concern that Namibia’s banking system could be vulnerable to global economic shocks being experienced as a result of the Russia-Ukraine conflict.
BoN Deputy Governor, Ebson Uanguta said growth in banking sector assets continued to recover from the lows experienced in the second quarter of 2020 at the peak of the pandemic.
He added that despite the lower liquidity position of the banking industry, the liquidity ratio remained well above the statutory minimum and the industry maintained adequate capital levels sufficient to meet the regulatory requirements and to absorb potential losses.
“The resilience of the domestic financial system has enabled it to withstand the impact of geopolitical tensions, inflationary pressures, tightening monetary policies and COVID-19,” he said.
The BoN’s Macro-Prudential Oversight Committee (MOC) also concluded that both the banking and non-banking financial sectors remained liquid, profitable and well capitalised at its third meeting on 4 August.
“In pursuit of safeguarding the stability of the Namibian financial system, the Bank of Namibia in collaboration with the Namibia Financial Institutions Supervisory Authority (NAMFISA) will continue to monitor risks and take appropriate steps. Potential financial vulnerability build-up would largely emanate from inflation and the impact on household disposable income and corporate profitability. Furthermore, the MOC will continue to monitor the level of asset quality. Of continued concern is the vulnerability build-up observed in the government debt level which has increased above the domestic threshold and SADC target,” said the deputy governor.
Uanguta noted that although both the Return on Equity (ROE) and Return on Assets (ROA) trended downwards during the first half of 2022 compared to December 2021, the ratios remain above the record levels experienced in the second quarter of 2020 due to the impact of the pandemic.
“Overall, the committee is of the view that slightly lower profitability is to be expected given the recent headwinds faced by the global and domestic economy. These developments are not concerning at this stage; however, the Committee will continue to monitor them going forward.”
He said the domestic economy is expected to improve in 2022 and 2023, albeit at a slower pace than previously anticipated.
Uanguta said global financial conditions have tightened considerably over the first half of 2022, with a negative outlook.
“According to the latest International Monetary Fund (IMF) Global Financial Stability Report, financial conditions have tightened substantially as central banks have adopted more hawkish stances to combat inflation. Specifically, this development poses a risk to emerging markets through potential capital outflows and currency depreciation,” he said.
