Repo rate maintained at 6.75%, as economic projections remain weak
The Bank of Namibia kept the Repo rate unchanged at 6.75% this week, as domestic economic activity slowed during the first four months of 2019 compared to the same period in 2018.
The slowdown was reflected in sectors such as mining, agriculture, construction and wholesale and retail trade. Similarly, the manufacturing, tourism and electricity sectors also displayed declining activity during the first quarter of 2019, relative to the corresponding period of 2018.
According to Bank of Namibia Governor Iipumbu Shiimi, going forward, the domestic economy is projected to remain weak in 2019.
Shiimi stated that the repo rate was kept unchanged to further support the one-on-one link between the Namibia Dollar and the South African Rand.
“We encourage businesses to take advantage of the low repo rate and borrow more from banks, particularly for investment purposes,” Shiimi added.
The central bank stated that the annual average growth in credit extended to the private sector increased to 6.4% during the first four months of 2019, compared to 6.1% in the corresponding period of 2018. This was mainly due to the utilisation of short-term credit facilities by businesses.
Shiimi further added since the previous monetary policy committee meeting in April 2019, most central banks in both the advanced economies and emerging market and developing economies have left their policy rates unchanged.
“The exceptions were the central banks of India and Angola, cutting policy rates. Inflation in the monitored advanced economies and emerging market and developing economies ticked up in April 2019, except in Russia, South Africa and Angola where it slowed,” Shiimi said.
Meanwhile, annual average inflation increased to 4.5% during the first four months of 2019 compared to 3.6% in the corresponding period of 2018. The rise is mainly due to an acceleration in inflation for the categories of food and non-alcoholic beverages as well as transport. Overall inflation is projected to average 4.5% in 2019.
In terms of foreign reserves, Shiimi said as of last month, the stock of international reserves stood at N$34.1 billion, compared to N$32.6 billion reported in the previous monetary policy committee statement. “This amount of international reserves is estimated to cover 5.6 months of imports of goods and services,” he concluded.