Chamwe Kaira
FNB Namibia economist Helena Mboti expects the South African Reserve Bank (SARB) to cut its repo rate by 25 basis points in the first quarter of 2026. The SARB’s 25 bps cut on 31 July 2025 was in line with FNB’s expectation and does not change its baseline view.
Mboti said that if the SARB adopts a more aggressive cutting cycle, especially one that eliminates or inverts the rate differential, the Bank of Namibia would likely respond in a similar manner.
“Likewise, a sharp unexpected rise in global inflation-driven factors like tariff hikes or global oil price shocks could prompt the SARB to raise rates, which would in turn pressure the Bank of Namibia to follow. In both scenarios, the Bank of Namibia is unlikely to sustain a significantly wider interest rate gap for long, as doing so would risk additional strain on external reserves and the currency peg in the medium term,” she said.
While the Bank of Namibia has reported no immediate concern over reserve adequacy, FNB maintains that external buffers may come under pressure in the second half of 2025 due to Eurobond repayments and renewed oil exploration.
Mboti said some operators plan to resume drilling and data analysis in the Orange Basin after a period of subdued activity. Reserves stood at 3.9 months of imports in June, compared to 4.8 months when excluding exploration-related outflows, showing the drag from energy activity.
“Weak regional growth and expected moderation in SACU receipts could further weigh on the reserve position going forward,” she said.
The Bank of Namibia is expected to remain cautious amid weak Private Sector Credit Extension (PSCE) growth and high borrowing costs, relying on its broader regulatory toolkit to manage the impact on households and businesses. The BoN’s Financial Stability Report shows that in 2024, annual credit growth was concentrated in large exposures at 32.7%, compared to overall PSCE growth of 4%.
“This suggests the economic recovery is being driven largely by large-scale corporate activity, likely in the mining sector, which employs less than 5% of the labour force. The Bank of Namibia appears to be exploring alternative tools to support domestic borrowing conditions for households and small businesses. The central bank urged local commercial banks to align their lending margins with other Common Monetary Area countries, a move that will lower borrowing costs by 25 bps by the end of the year without adjusting,” said Mboti.
