Peter Amadhila, the Vice-President of the Namibia Local Business Association (NALOBA), expressed dissatisfaction with the unchanged repo rate, stressing the need for it to return to normal to alleviate the hardships faced by many businesses.
“NALOBA and the entire business community, in general, are not impressed by the recent announcement. The repo rate is already extremely high, making the business environment very tough and unaffordable. In our current dilapidated economy, every Namibian citizen wants to see the repo rate gradually decreasing until it returns to normal,” he stated.
Amadhila’s remarks came in response to the announcement by Bank of Namibia Governor Johannes !Gawaxab that the central bank would maintain the repo rate at 7.75 percent, while the prime lending rate would remain steady at 11.50 percent.
He emphasized that the central bank should seek alternatives rather than continue to increase or maintain the repo rate, as it exacerbates the challenges faced by Namibians.
When asked about the possibility of a repo rate reduction, !Gawaxab explained that the central bank’s decisions are based on data collected, particularly factors like inflation, rather than arbitrary choices.
“We do not decide to increase or decrease the repo rate; we do it based on data availability to safeguard the peg between the Namibian dollar and the South African Rand,” said the Governor.
The decision to keep the repo rate unchanged was made following a comprehensive review of domestic, regional, and global economic developments.
Meanwhile, domestic economic activity expanded during the first ten months of 2023, albeit at a slower pace compared to the same period in 2022. Private Sector Credit Extension (PSCE) annual growth remained weak at 1.8 percent in October 2023, compared to 2.8 percent in 2022.
PSCE growth also remained subdued over the first ten months of 2023, averaging 2.5 percent compared to 3.5 percent during the same period in 2022.
The merchandise trade deficit continued to improve, and international reserves remained sufficient to support the currency peg and meet international financial obligations. This improvement was observed across most sectors, including mining, electricity generation, agriculture, tourism, and more, although the construction sector remained weak.
In 2023, Gross Domestic Product (GDP) growth is estimated to decline to 3.9 percent from 7.6 percent in 2022, primarily due to slower growth in the primary industry. Growth is expected to further slow to 3.4 percent in 2024.
Governor !Gawaxab highlighted that risks to the domestic economic outlook remained broadly unchanged, driven by external factors such as weakening global economic growth, tighter global monetary policy, geopolitical tensions, geo-economic fragmentation, and South Africa’s load-shedding fallout.
Internal risks included the ongoing drought, uncertain rainfall conditions, and water supply interruptions in coastal towns.
Namibia’s annual inflation rate averaged 6.0 percent during the first ten months of 2023, slightly up from 5.9 percent in the corresponding period in 2022.
As of November 30, 2023, the stock of international reserves stood at N$49 billion, down from N$51.4 billion recorded at the end of October 2023, mainly due to higher net commercial bank outflows.
“At this level, the stock of international reserves is estimated to cover 5.1 months of imports, remaining sufficient to support the currency peg between the Namibia Dollar and the South African Rand while meeting the country’s international obligations,” the Governor explained.