THE Bank of Namibia’s Monetary Policy Committee (MPC) has maintained the repo at 3.75%.
The MPC is of the view that the rate remains appropriate to continue supporting domestic economic activity, particularly in light of the alarming increase in COVID-19 infections and hospitalisation, while at the same time safeguarding the one-to-one link between the Namibia Dollar and the South African Rand.
The central bank’s governor, Johannes !Gawaxab stated that the global economy observed a recovery in the first quarter of 2021 relative to the previous quarter.
Inflation rates in most monitored Advanced Economies (AEs) and Emerging Market and Developing Economies (EMDEs) increased. Monetary policy stances of key monitored economies remained generally accommodative, !Gawaxab said.
On the local front, he stated the domestic economy remained weak during the first four months of 2021.
The slowdown in economic activity was mainly observed in the tourism, mining, agriculture, manufacturing, construction, as well as transport and storage sectors.
On the contrary, activity in the wholesale and retail trade sector, as well as the telecommunications subsector recorded positive growth during the same period.
Recent monthly indicators showed that the mining, as well as the transport and storage sectors gained some momentum.
Going forward, !Gawaxab said the domestic economy is expected to grow by 2.7 % in 2021.
“Since the last MPC meeting, uncertainties and risks have increased and are likely to impact the economy negatively going forward. Hence, the successful procurement and expeditious rollout of COVID-19 vaccines in Namibia remain key to the extent and speed of the economic recovery,” !Gawaxab said.
Annual average inflation increased to 3.2% during the first five months of 2021, compared to 2.1% for the corresponding period in the previous year.
The increase in inflation was mainly driven by an increase in food and housing inflation during the period under review.
Growth in Private Sector Credit Extension (PSCE) averaged 2.3 % for the first four months of 2021, lower than the average of 5.8% recorded during the same period in 2020.
The slowdown in PSCE was due to lower demand for credit by both businesses and households during the review period.
Since the last MPC meeting, year-on-year growth in PSCE rose to 3.1% at the end of April 2021 from 2.1% at the end of February 2021, mainly due to base effects.
As at 31 May 2021, the stock of international reserves stood at N$39 billion compared to N$34.7 billion on 31 March 2021 as reported in the previous MPC statement.
!Gawaxab explained that the increase in reserves was partly due to an inflow from the IMF in the form of a disbursement of IMF Rapid Financing Instrument (RFI) and SACU receipts.
At the level of N$39 billion, the international reserves were estimated to cover six 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,” !Gawaxab concluded.