Namibia may consider reviewing its currency peg to the South African Rand if its economy booms due to oil and gas discoveries and development of the country’s green hydrogen sector, according to central bank Governor Johannes !Gawaxab.
!Gawaxab made the remarks following the monetary policy announcement taken to maintain the repo rate at 7.75%.
The prospect that Namibia’s economic structure could change may give renewed discussions about de-pegging from the Rand, !Gawaxab said.
“When you look at what is happening with the economic structure of the country that is changing, what if Namibia becomes a serious oil exporter? What if green hydrogen takes off and we become a large player in that space? We need to think about how we prepare ourselves as a nation in terms of the choice of our exchange regime, but at this stage, the benefits far outweigh the costs,” !Gawaxab said.
De-pegging from the Rand at the moment would lead to a lot of volatility and hurt Namibia, he said.
“Currently, we have got a lot of volatility, the exercises and simulations we have done, we are better off currently. We are better off in the [Common Monetary Area] arrangement,” !Gawaxab said.
At independence in 1990, Namibia opted to remain in the Common Monetary Area (CMA), leaving monetary and exchange rate policies to South Africa. Meanwhile, the Monetary Policy Committee (MPC) of the central bank, in its decision to keep the repo rate unchanged at 7.75%, said the decision was guided by disinflation domestically and globally.
“The MPC noted the continued disinflation both globally and domestically. With real interest rates remaining positive, and slow credit growth, amid a fair level of international reserves, the MPC decided to maintain the repo rate at its current level.
The policy stance will continue to safeguard the one-to-one link between the Namibia Dollar and the South African Rand and support domestic economic activity,” !Gawaxab said of the decision to maintain the repo rate at 7.75%.
