Chamwe Kaira
Simonis Storm says credit and liquidity data for December 2025 show that monetary easing is continuing to filter through to the real economy, although at a measured and uneven pace as once-off liquidity effects linked to the Eurobond redemption fade.
Private sector credit growth eased slightly to 4.4% year on year in December 2025, down from 4.5% in November.
This points to a gradual loss of momentum as the year came to an end.
Despite the slowdown, Simonis Storm said credit growth remains well above the weak levels seen in 2023 and early 2024. This suggests an improvement in underlying credit conditions rather than the start of a downturn.
Private sector credit extension (PSCE) also slowed marginally to 4.4% year on year in December from 4.5% in the previous month. The firm said this reflects softer borrowing by companies and continued caution among households.
It expects PSCE growth to stabilise between 4.5% and 5.0% in 2026, supported by easier monetary conditions, investment-led corporate borrowing, and a gradual normalisation of liquidity.
The policy rate remains unchanged at 6.50%, while lending rates already reflect earlier easing. At its most recent meeting, the Bank of Namibia decided to keep the repo rate unchanged, signalling policy continuity amid moderating inflation and stable liquidity conditions.
Average lending rates have continued to edge lower, while deposit rates have adjusted to the softer interest-rate environment.
Simonis Storm expects room for two additional 25-basis-point rate cuts in 2026, one in the first half of the year and another in the final quarter, if inflation stays contained and financial conditions remain stable. Headline inflation slowed further to 3.2% year-on-year in December, remaining within the central bank’s target range.
Corporate credit growth moderated to 6.8% year on year in December, but borrowing remains focused on investment. Strong growth in instalment sales and leasing credit reflects spending on vehicles, machinery, and productive assets across sectors such as agriculture, mining, manufacturing, and logistics.
Slower growth in overdrafts and other short-term facilities points to better cash-flow management rather than weaker investment appetite.
Household credit growth rose slightly to 2.7% year-on-year in December but remains limited by affordability pressures, modest wage growth, and high living costs.
Mortgage lending continues to contract, while borrowing is concentrated in asset-linked categories, mainly vehicle finance. This suggests that household balance-sheet repair is still underway.
On liquidity and the external position, December data show continued post-eurobond normalisation, with some month-to-month volatility. Banking-sector cash balances eased to N$5.1 billion, reflecting lower diamond inflows, while international reserves increased to N$51.6 billion.
This equals 3.3 months of import cover, or 3.8 months when excluding oil and gas-related imports.
Simonis Storm said these trends confirm that the liquidity tightening seen in October was temporary and linked to specific events, rather than a sign of stress in the financial system.
Caption
Banking-sector cash balances eased to N$5.1 billion in December.
- Photo: Contributed
