The Bank of Namibia (BoN) has left its repo rate unchanged at 6.75%, opting to support economic activity while protecting the Namibia dollar’s peg to the South African rand despite a weaker growth outlook and rising inflationary pressures.
The decision, taken at the Monetary Policy Committee’s fourth bi-monthly meeting of 2026 held on 10 and 11 August, keeps the prime lending rate unchanged at 10.25%.
Bank of Namibia Governor Ebson Uanguta said the MPC concluded that maintaining the current policy stance was appropriate to safeguard external stability while supporting the domestic economy.
“Following a comprehensive review and extensive deliberations, the MPC decided to keep the repo rate unchanged at 6.75%. Similarly, the prime lending rate remains at 10.25%. This policy stance is deemed appropriate to support the stock of international reserves and safeguard the one-to-one link between the Namibia Dollar and the South African Rand,” Uanguta said.
The decision comes as the central bank downgraded its economic growth forecast for 2026 to 2.1%, 0.5 percentage points lower than its previous projection, citing weaker-than-expected performance across key sectors.
Although the revised forecast remains above the estimated 1.7% growth recorded in 2025, the Bank said the recovery would be constrained by contractions in primary industries and slower activity in the secondary and tertiary sectors.
High-frequency indicators showed subdued activity during the first half of the year, particularly in mining, manufacturing, electricity generation and transport, although agriculture and wholesale and retail trade recorded improvements.
“Domestic economic activity moderated during the first half of 2026 relative to the corresponding period in 2025. Available high-frequency indicators suggest broad-based sluggish economic performance, especially in the mining, manufacturing, electricity generation and transport sectors. Meanwhile, improved economic activity was noted in the agriculture and wholesale and retail trade sectors,” Uanguta said.
The Bank also highlighted slower global growth, outbreaks of Foot and Mouth Disease in neighbouring countries and the potential impact of El Niño conditions as downside risks to the domestic economy.
At the same time, inflationary pressures have intensified.
Annual inflation accelerated to 4.4% in June from 4.1% in May, driven largely by higher transport costs. Despite the increase, average inflation for the first half of 2026 stood at 3.2%, lower than the 3.6% recorded during the same period last year due to softer food price inflation.
The BoN now expects inflation to average 4.0% in 2026, up from 3.5% in 2025, before easing slightly to 3.9% in 2027. The 2027 forecast was revised upwards, reflecting expectations that geopolitical tensions in the Middle East will continue to place pressure on global prices.
“Domestic inflationary pressures have remained elevated since the preceding MPC meeting. Accordingly, annual headline inflation rose to 4.4% in June 2026 from 4.1% in the preceding month, primarily driven by higher transport price inflation,” Uanguta said.
The MPC said it weighed the need to narrow the interest rate differential with South Africa to limit capital outflows against subdued domestic growth and a relatively benign inflation outlook.
It concluded that maintaining the current rate was justified, supported by adequate foreign exchange reserves and moderate inflation expectations.
Private sector borrowing also remained subdued.
Annual Private Sector Credit Extension (PSCE) growth stood at 4.5% in June, slightly lower than at the previous MPC meeting, mainly due to weaker credit uptake by businesses, although household borrowing continued to increase.
Globally, the BoN noted that economic growth is expected to slow from 3.5% in 2025 to 3.0% in 2026 before recovering to 3.4% in 2027, while global inflation is projected to rise from 4.1% to 4.7% over the same period before easing in 2027.
The Monetary Policy Committee will hold its next meeting on 26 and 27 October 2026, when it will reassess economic growth, inflation and monetary conditions.
