The Bank of Namibia’s Monetary Policy Committee (MPC) has decided to maintain the Repo rate unchanged at 7.75%, citing sufficient reserves and stable domestic economic activity throughout 2023 and early 2024.
Bank of Namibia Governor Johannes !Gawaxab said that as of March 2024, Namibia’s international reserves decreased to N$54.3 billion from N$55.8 billion in January 2024, attributed to commercial bank outflows and government payments.
Despite the decrease, he noted that reserves cover 3.8 months of imports, supporting the currency peg with the South African Rand and meeting financial obligations.
“This remains sufficient to sustain the currency peg between the Namibia Dollar and the South African Rand while meeting the country’s international financial obligations. The import cover, excluding hydrocarbon exploration-related imports, however, stood higher at 4.3 months,” he said.
The Governor noted that risks to the domestic economic outlook have remained broadly unchanged since the previous MPC meeting, although the conflict in the Middle East has escalated notably.
“External risks continue to reflect the prolonged tight global monetary policy stance, disruptive geopolitical tensions, and geoeconomic fragmentation. Internally, adverse risks mainly include uncertain rainfall patterns and water supply interruptions, particularly at the coastal towns,” he said.
!Gawaxab further noted that annual growth in PSCE moderated to only 1.7% in February 2024 from 1.9% in December 2023, as reported at the previous MPC meeting.
Similarly, PSCE growth slowed to an average of 2% during the first two months of 2024, compared to 2.8% in the corresponding period in 2023.
“This is attributed to lower credit demand by households, particularly in the categories of mortgages and other loans, advances, and overdrafts,” he explained.
This comes as analysts have projected the MPC to maintain the repo rate at 7.75% until South Africa’s cutting cycle resumes in the second half of 2024.
BoN noted that domestic inflation eased, averaging 5% in Q1 2024 compared to 7% in 2023, driven by lower food and transport prices.
“March 2024 saw inflation at 4.5%, down from 5.4% in January. Predictions suggest a further decrease to 4.9% in 2024, with geopolitical tensions and rainfall uncertainty influencing this slight adjustment,” !Gawaxab said.