3-5 years before Yuan added to reserves
The Bank of Namibia this week stated that it would take at least three to five years to add to the Yuan to its mix of international reserves its Governer, Ipumbi Shiimi said at a monetary policy announcement.
According to Shiimi, the central bank has to increase its import cover before it can add the Yuan to its mix of international reserves. “We will need about 4-5 months of import cover. To travel that path will require 3 to 5 years. Once we reach those levels, we will be comfortable.”
The Bank of Namibia according to Shiimi was making attempts to increase the import cover, with the end goal being 6 months of import cover at least. “We have taken a decision to create a buffer, we are encouraging institutional investors to bring investment back home.” He added that more asset swaps were on the horizon, similar to a swap the Government Institutions Pension Fund recently undertook.
He emphasised, “it is a journey.” Just last year, the International Monetary Fund advised the Bank of Namibia to increase its import cover to 6 months. As at 12 June, the level of International Reserves stood at N$22 billion, equating to 6.2 times the currency in circulation.
Another announcement made by Shiimi was that the National Assembly and the National Council had signed off amendments to the Credit Amendment Bill. Once signed off by H.E President Hage Geingob, the amendments will require consumers to pay deposits for purchases made on hire-purchase.“The amendment will stem out the purchasing of unproductive goods.” Shiimi said.
Meanwhile, the Bank of Namibia took the decision to leave the repurchase agreement (REPO) rate at 7%, a move it said was necessary to support economic growth. Shiimi said “looking at conditions, it is quite harmful to change the repo rate. We are concerned about high growth in credit. We have raised our concerns and are pleased that credit is now sustainable. It is time to give the consumers breathing space.”
Shiimi also noted that the central bank was busy with a revision of the growth outlook and stated that a decision would be made before August. Nonetheless, he was still hopeful growth would be respectable.