Chamwe Kaira
The repo rate is expected to remain unchanged at 6.75% for the rest of the year.
The Bank of Namibia (BoN) aims to narrow the interest rate gap with South Africa, which currently stands at 25 basis points, in order to maintain stable capital flows.
The central bank kept the repo rate unchanged during its June meeting.
“This decision reflects its commitment to maintaining the currency peg with the South African rand while also supporting the domestic economy and aligning with global and regional policy trends,” said FNB Namibia economist Cheryl Emvula.
She added that the monetary policy committee (MPC) had flagged external risks, including global trade uncertainty and the conflict in the Middle East, which could impact global inflation.
Household credit growth eased slightly to 2.4% year-on-year in June, down from 2.5% in May and 2.7% in June last year.
“The marginal decline of 0.1 percentage points is a result of continued subdued demand in mortgage and overdraft credit categories, although this was partially offset by stronger growth in loans and advances and instalment and leasing credit,” Emvula explained.
Inflation rose to 3.7% year-on-year in June, up from 3.5% in May. The increase was mainly due to higher food, rent, and service costs, while transport prices continued to fall. Monthly inflation was flat at 0.0%.
Core inflation also edged up to 4.2% year-on-year, reflecting ongoing pressure from housing costs. Food, housing, and alcohol were the biggest contributors, while transport helped keep inflation lower.
“Looking ahead, inflation is expected to rise to 4% year-on-year in July and reach 4.5% by December, driven by rising costs in housing, utilities, transport, and administered services,” Emvula said.
Namibia’s broad money supply (M2) growth slowed to 7.6% year-on-year in June, down from 8.1% in May. The slowdown was mainly due to a decline in currency in circulation outside depository corporations and other deposits.
Namibia’s net financial position rose to N$9.3 billion in June, up from N$8.7 billion in May, its highest level since October 2024.
“While this signals improved financial stability, recent trends over the past six months show notable fluctuations, which could pose risks to liquidity conditions, especially as the government prepares to redeem the N$750 million Eurobond,” Emvula said.
She noted that any unexpected revenue shortfalls or increases in spending could quickly reverse the current gains, tighten liquidity, and potentially limit credit availability to the private sector.
