THE central bank’s monetary policy committee (MPC) has announced that will it will keep the Repo rate unchanged at 3.75%.
The Repo rate is the rate at which the central bank lends money to the commercial banks against securities.
In the case of the repo rate hike, the rate of interest for example on home loan increases.
Speaking at the announcement, the Bank of Namibia’s governor, Johannes !Gawaxab stated that the MPC is of the view that the rate remains appropriate to continue supporting domestic economic activity, while at the same time safeguarding the one-to-one link between the Namibia Dollar and the South African Rand.
He further noted that the monetary policy stances of key monitored economies were generally accommodative.
Touching on the local economy, !Gawaxab stated that the domestic economic activity contracted severely by 8.0% in 2020, compared to a contraction of 0.6% in 2019.
Contractions were observed in key sectors such as tourism, transport, mining, agriculture, manufacturing, construction, wholesale and retail trade, as well as the public sector.
!Gawaxab further stated the contraction was mainly due to the devastating effects of the COVID-19 pandemic, with the sharpest declines in output recorded in the tourism and transport sectors.
On the contrary, activity in the electricity and water, as well as information and communication sectors, recorded positive growth during the same period.
Recent developments in the domestic economy also pointed to subdued activity in most economic sectors during the first two months of 2021, compared to the same period of 2020.
Going forward, !Gawaxab stated the domestic economy is expected to grow by 2.7% in 2021 and added that the successful procurement and expeditious rollout of COVID-19 vaccination in Namibia will be critical for the extent and speed of the economic recovery.
Touching on credit expanded to businesses, !Gawaxab noted that domestic demand remained subdued as evidenced by slow growth in Private Sector Credit Extension (PSCE), which averaged 2.0% during the first two months of 2021.
This growth is much lower than the 6.7% recorded during the same period in 2020.
“Since the last MPC meeting, year-on-year growth in PSCE remained almost unchanged at 2.1% at the end of February 2021 from 2.0% at the end of December 2020,” !Gawaxab said.
Annual average inflation increased to 2.7% during the first two months of 2021, compared to 2.3% for the corresponding months in the previous year.
The increase in inflation was mainly reflected in the food and beverages categories during the period under review.
Touching on the stock of international reserves, !Gawaxab said that as at the 31st of March 2021, the stock of international reserves stood at N$34.7 billion compared to N$34.4 billion reported in the February 2021 MPC statement.
He explained that the increase in reserves was mainly due to an inflow resulting from diamond sales, which was partly offset by the appreciation of the NAD against the USD.
“The N$34.7 billion of international reserves is estimated to cover 5.4 months of imports. At this level, the reserves remain sufficient to protect the peg of the Namibia Dollar to the South African Rand, while meeting the country’s international financial obligations. The MPC noted the increase in international reserves in early April 2021 to N$38.7 billion resulting from the disbursement of the IMF Rapid Financing instrument and SACU receipts,” !Gawaxab concluded.