Zorena Jantze
THE central bank, the Bank of Namibia, has announced the increase of the Repo Rate by 25 basis points to 4.0%.
The central bank is of the view that the rate is appropriate to safeguard the one-to-one link between the Namibia dollar and the South African rand, while meeting the country’s international financial obligations.
The repo rate is the rate at which the central bank lends money to commercial banks which in turn has a ripple effect on interest rates when borrowing from institutions.
An increase in the repo rate will mean that the interest on your house and vehicle payments or and investment may increase too.
The increase of the repo rate comes fresh off the heels of the South African reserve bank increasing its repo rate to 4.0% as well.
Governor of the Bank of Namibia Johannes !Gawaxab explained the monetary policy stance is a step towards normalizing the current negative real interest rate environment and establishing a positive real interest rate that is conducive to long-term economic growth.
He further noted that addressing vaccine hesitancy remains key to the extent, spend and sustainability of economic recovery.
!Gawaxab further noted that real GDP growth in the global economy improved in 2021, while inflation rates in most Advanced Economies, and Emerging Market and Developing Economies continued to trend upwards.
He noted that monetary policy stances of key central banks generally remained accommodative, although some central banks have started tightening rates.
Touching domestic economy, !Gawaxab said that the overall domestic economic activity recovered in 2021 compared to 2020.
The increase in economic activity was observed in major sectors such as mining, wholesale and retail trade, communications and tourism.
On the contrary, activity in construction, manufacturing and transport sectors as well as the number of cattle marketed slowed over the same period.
The annual average inflation increased to 3.6% compared to 2.2 % in the previous year. The increase in inflation was mainly driven by higher prices for food, transport and housing.
Growth in Private Sector Credit Extension (PSCE) or the rate at which businesses and individuals borrow funds declined to an average of 2.4% in 2021, lower than the 3.5% registered in 2020.
!Gawaxab stated that the slowdown in PSCE was due to lower demand for credit by both businesses and households as a result of slow domestic activity during the review period.
“Since the last MPC meeting, month-on-month growth in PSCE slowed to 1.2% in December 2021, from 2.9% registered in October,” !Gawaxab said.
