The Bank of Namibia (BoN) is expected to keep the policy rate unchanged at its Monetary Policy Committee meeting on Wednesday, as the central bank continues to prioritise protecting foreign reserves and maintaining macroeconomic stability.
According to the latest Private Sector Credit Extension (PSCE) update from First National Bank (FNB) Namibia, the repo rate is likely to remain steady, although the bank still anticipates a modest 0.125 percentage point reduction in prime lending rates before year-end.
FNB said such an adjustment “is likely to remain the most prudent strategy for easing borrowing costs and enhancing credit affordability in the near term without jeopardising external resilience at this critical moment”.
The report said that, despite weaker private sector credit growth and subdued domestic demand, the Bank of Namibia’s policy flexibility remains constrained by external vulnerabilities. It noted that pressure on international reserves — already weakened by major outflows and recent foreign payment obligations — has limited the scope for further monetary easing.
FNB added that, although a small reduction in prime lending rates may offer targeted relief to borrowers, the central bank must avoid actions that could “trigger further reserve depletion at a time when global uncertainties and fluctuating capital flows continue to pose risks”.
The report further warned that “the current level of foreign reserves remains at a worrisome threshold, which could challenge this assumption if external shocks materialise”, stressing the need for caution.
According to FNB, international reserves fell by 11.2% to N$48.6 billion in October, down from N$54.7 billion, largely due to the US$750 million Eurobond redemption, net rand outflows, government foreign payments and the stronger Namibia dollar.
The bank said current reserves now cover 3.2 months of imports, or 3.5 months when excluding oil exploration activities. It expects reserves to remain under pressure because of lower SACU receipts, although softer domestic import demand and improved global conditions may offer modest support.
FNB also reported that government liquidity deteriorated sharply, falling to N$1.2 billion in October from N$8.1 billion in the previous month.
Net claims on the central government widened to N$6.2 billion, which the bank linked to the Eurobond repayment and rising financing needs amid revenue shortfalls — factors likely to tighten liquidity in the domestic market in the coming months.
Meanwhile, FNB said broad money supply growth slowed to 7.5% year-on-year in October from 10.3% previously, as net foreign assets contracted sharply following the Eurobond settlement. Domestic claims rose by 17.5% year-on-year, driven mainly by increased government borrowing.
According to FNB, transferable deposits grew by 3.1% year-on-year, other deposits slowed to 13.2%, and currency in circulation eased to 5.2%.
