Chamwe Kaira
FNB Namibia economist Cheryl Emvula says Namibia’s import coverage ratio could fall below the three-month target following the US$750 million eurobond redemption in October.
According to the Bank of Namibia (BoN), international reserves stood at N$54.7 billion in September, down from N$57 billion in August.
The 4.1% monthly decline was driven by higher government external obligations and foreign payments.
“Despite the reduction, reserves remain sufficient for the Bank of Namibia to fulfil its mandate of maintaining macroeconomic stability. At the current level, reserves cover 3.6 months of imports and four months excluding oil exploration and appraisal activities. Looking ahead, the import coverage ratio is likely to breach the three-month target with the US$750 million redemption in October,” said Emvula.
The government’s net financial position stood at N$8.1 billion in September, slightly below N$8.3 billion in August.
“This position will see significant strain with the redemption of the US$750 million Eurobond in October, which likely alleviated pressure on both fiscal liquidity and overall banking sector liquidity over the last months. Nonetheless, other risks to fiscal stability persist. Potential revenue shortfalls, such as the observed N$3.2 billion revenue shortfall in the mid-term budget review for the 2025/26 financial year, or unexpected increases in debt servicing expenditure, could exert pressure on government financing in the short-to-medium term,” said Emvula.
Broad money supply (M2) growth edged slightly higher to 10.3% year-on-year in September, up from 10.2% in August.
The increase was mainly due to higher deposits from financial and non-financial institutions, reflecting improved net foreign assets as non-residents increased their deposit placements.
Other deposits grew by 14.6% year on year in September, compared to 12.2% in August.
On 15 October, the monetary policy committee (MPC) voted to cut the policy rate to 6.50% from 6.75%.
The decision was driven by weaker-than-expected domestic activity, with BoN aiming to stimulate economic growth while ensuring that capital inflows remain stable.
The rate cut followed earlier guidance for banks to lower lending rates by 0.125 percentage points in September, with another 0.125-point reduction expected in December.
“While this easing may not immediately trigger a significant rise in borrowing for households and corporates, it is expected to support PSCE growth, particularly in unsecured lending. The Bank of Namibia is expected to maintain this rate in the near term, given weak domestic conditions as reserve pressures unveil,” Emvula said.
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Cheryl Emvula
