International reserves decrease to N$55,6 billion in May


The Bank of Namibia’s stock of international reserves decreased by 1.2% month-on-month to N$55,6 billion as at end of May. The decrease stemmed from higher foreign government payments, as well as an increase in customer foreign currency outflows.

The foreign reserves translated into 3.9 months of import cover, continuing to remain above the international benchmark of three months and adequate to support the Namibia Dollar and the South African Rand currency peg.

Notably, the import cover excluding imports of oil exploration and appraisal activities stood at 4,4 months at the end of May, relative to 4.7 months recorded at the end of April.

Annual growth in broad money increased at the end of May. M2 growth increased to 8.4%, compared to the 5.7% growth posted in the prior month. The increase in M2 growth emanated from an increase in domestic claims. Growth in domestic claims increased, recording a growth of 2.5% in May, relative to a mere growth rate of 0.2 in April. This was mainly supported by an increase in the growth in claims on other sectors. The increase in the growth of M2 was also evident in increased growth for currency outside depository corporations, demand, as well as longer dated deposits in the review period.

The annual growth in Private sector credit (PSCE) increased to 3.2% in May, relative to a growth of 1.6% recorded in April. The increase in PSCE growth mainly stemmed from an increase in demand by businesses during the review period, whereas growth in credit extended to households remained stagnant.

The annual growth in business credit increased to 4.7% in May, higher than a meagre growth of 0.6% in April. This was mainly due to an increase in credit uptake by businesses in the form of other loans and advances from corporations in the manufacturing and retail sectors. Credit extended in the form of instalment sales and leasing credit, also rose significantly and contributed to the robust growth in the uptake of credit by businesses.

The rise in instalment sales continues benefitting from the robust demand for car rental over the review period. The annual growth in credit extended to households stood at 2.2% in May, remaining stagnant for the third consecutive month.

Slight improvements in the growth of other loans and advances and overdrafts credit were offset by a decrease in mortgage loans, the largest component.

The banking industry’s overall liquidity position remained high in May, compared to the earlier months on the year. The industry liquidity averaged N$8.6 billion in May, closely aligned to the level observed in April. The liquidity levels are expected to remain elevated in June as corporates are freeing up long term deposits on the back of expected corporate tax payment.

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