Despite a drop in the Southern African Customs Union revenue by 22 percent in 2021 to N$16.6 billion from N$21.4 billion in 2020, as well as the redemption of Namibia’s first Eurobond of N$7.2 billion, the foreign reserve position of the country increased by 38.5 percent over the course of 2021 to a level of N$43.9 billion at year end.
The growth in foreign reserves during 2021 resulted mainly from the International Monetary Fund’s Rapid Financing Instrument loan amounting to N$3.9 billion, an inflow of N$1.5 billion from the African Development Bank also a loan, and the N$6.8 billion inflow from the Asset Swap Programme.
By the end of March 2022, the international reserves stood at N$36.7 billion, which was 8.6 times higher than the total currency in circulation and could adequately maintain the one-to-one currency peg with the South African Rand.
At this level, the international reserves translated to an import cover of 6.4 months. These robust reserve levels are expected to provide some insulation against a potential deterioration in global liquidity as monetary conditions tighten across developed and developing economies, a situation which augurs well for financial stability in Namibia.
This is contained in the Bank of Namibia (BoN) and the Namibia Financial Institutions Supervisory Authority (NAMFISA) joint release for the annual Namibia Financial Stability Report (FSR).
The FSR Report highlights specific risks emanating from the macroeconomic environment, domestic household and corporate debt, the banking sector, the Non-Banking Financial Institutions sector, as well as the payment and settlement system.
The Namibian financial system during 2021 continued to withstand shocks from the impact of the global Covid-19 pandemic.
Global growth is expected to moderate in 2022 and 2023 reflecting worsening global supply shortages and a quicker withdrawal of monetary accommodation across most economies.
The Namibian economy experienced positive growth of 2.4 percent in 2021 and is projected to pick up to 3.4 percent in 2022 and 3.7 percent in 2023, respectively.
Household debt growth slowed, while corporate debt increased in 2021 and the banking sector remained liquid, profitable and well capitalised during the year under review, despite sluggish economic conditions.
Meanwhile, the non-bank financial institution (NBFI) sector remained resilient during 2021, withstanding the effects of COVID-19, rising inflation, and the interest rate hikes.
Namibia’s payment system and infrastructure remained stable and continued to operate efficiently and effectively in 2021.